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Published by TIMES Group Seventh Edition 2015-2016 FIRST FOR FINANCE

AN AWARD-WINNING GLOBAL LEADER - IN TRUST AND FIDUCIARY SERVICES Seventh Edition 2015-2016

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 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 [email protected]. VISIT US ONLINE AT RBCWEALTHMANAGEMENT.COM 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 Monetary Authority); Roycan Trust Company SA; RBC Trustees () Limited (Registered company number 37379 regulated by the Jersey and Guernsey 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 RBC356/CA/2729/March 2016 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 full page 11/3/15 12:23 pm Page 1 full page 11/3/15 12:25 pm Page 1

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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 . layout jersey 2015 11/3/15 10:29 am Page 3

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 www.jerseyfsc.org The Jersey Financial Services Commission, responsible Jersey for the regulation and supervision of the Island’s Jersey Finance Limited, 4th Floor, Sir Walter Raleigh House, 48-50 Esplanade, St Helier, Jersey JE2 3QB financial services industry. Tel: +44 (0)1534 836000 | Fax: +44 (0)1534 836001 | Email: [email protected] London www.locatejersey.com Jersey Finance Limited, 4th Floor, 2 Queen Anne’s Gate, London SW1H 9BP The official website of Locate Jersey which assists Tel: +44 (0)7908 274694 | Email: [email protected] individuals or organisations looking to relocate to the Island. Hong Kong Jersey Finance Limited, Room 5, 20th Floor, Central Tower, 28 Queen’s Road Central, Central, Hong Kong For details on Jersey residency contact: Tel: +852 2159 9652 | Fax: +852 2159 9688 | Email: [email protected] [email protected] Shanghai (Launchpad presence with CBBC) Unit 1708, Garden Square, 968 Beijing Road, W Shanghai 200040 DIGITAL JERSEY Tel: +86 21 3100 7900 Ext.226 | Fax: +86 21 6229 0001 | Email: [email protected] www.digital.je Abu Dhabi Working alongside government and industry, Digital Jersey Finance Limited, Regus Sowwah Square, 34th Floor, Al Maqam Tower, Abu Dhabi UAE Jersey coordinates activities towards improving the Tel: +971 (0)2 418 7533 | Email: [email protected] Island’s environment as a location of choice for digital business. Dubai Jersey Finance Limited, Level 41, Emirates Towers, Dubai, UAE PO BOX 31303 THE JERSEY DEVELOPMENT COMPANY Tel: +971 (0)4 319 9923 | Email: [email protected] Delhi www.jerseydevelopment.je Jersey Finance Limited, (Sannam S4) 3rd Floor, Devika Tower 6, Nehru Place, New Delhi - 110019 The Jersey Development Company (JDC) - wholly Tel: +91 11 42124102 | Email: [email protected] owned by the States of Jersey – develops States’ land and property assets no longer required for public Mumbai service and the Waterfront development. 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: [email protected]

INDEX OF ADVERTISERS Kendrick Rose 10 ADCB 7 Logicalis 13 Ashburton Investments 30 Moore Management IFC Baker & Partners 5 Moore Stephens Fund Administration 88 BNP Paribas 9 Nedbank Private Wealth Limited 14 Carey Olsen 55 Ogier 25 Collas Crill 66 PINEL Advocates 91 Comsure Group 115 PwC Channel Islands 75 Crestbridge 27 Quilter Cheviot 2 Deutsche Bank 62 RBC Wealth Management 92, OBC Equiom 61 SANNE 81 First Names Group IBC Sator Regulatory Consulting Limited 48 HSBC Expat 34 International 112 Infrasoft Technologies Jersey Limited 71 Touchstone 95 JT 116 Viberts 96, 97 JTC 18 Voisin and Volaw 102

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CONTENTS

Contents

11 PREFACE By Senator , , States of Jersey 15 FOREWORD By Joe Moynihan, Director of Financial Services, States of Jersey 19 INTRODUCTION By Geoff Cook, Chief Executive, Jersey Finance

OUTLOOK 21 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 26 Jersey’s broadening role as a gateway into European markets By Robert Christensen MBE, Chairman, Jersey Finance JERSEY’S GLOBAL REACH 31 Jersey’s External Relations By Senator Sir , Minister for External Relations, States of Jersey 35 Jersey’s ever expanding international reach By Richard Corrigan, Deputy Chief Executive, Jersey Finance 38 Jersey Finance 2015 Roundtable LEGAL SYSTEM 45 Robust and responsive legal support By Timothy Le Cocq QC, HM Attorney General, Jersey REGULATION, SUPERVISION & COMPLIANCE 49 Addressing a dynamic regulatory environment By John Harris, Director General, Jersey Financial Services Commission (JFSC) 52 Jersey’s evolving AML/CFT regime By Helen Hatton, Managing Director, Sator

CORPORATE SERVICES 57 Enhancing Jersey’s cutting edge corporate law By Robin Smith, Partner, Carey Olsen

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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 JOUFSOBUJPOBMMBXmSNXJUITXJGU JOTJHIUGVMBOEDPODMVTJWFSFTVMUT To achieve your objectives, contact Stephen Baker, Senior Partner via [email protected]. www.bakerandpartners.com

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CONTENTS

Contents

BANKING & FINANCE 63 Jersey’s attractiveness for banks and their customers By Richard Ingle, President, Jersey Bankers Association (JBA) 67 Jersey’s adaptable and innovative banking industry By Andreas Tautscher, Chief Country Officer, Deutsche Bank 70 Expats expect a tailor-made service By Dean Blackburn, Head of HSBC Expats

ACCOUNTING 73 Representing accountants in Jersey for 40 years By Andrew Quinn, President, Jersey Society of Chartered and Certified Accountants (JSCCA) MARKETS & EXCHANGES 77 Jersey and the capital markets - AIMing for the top By Sara Johns, Managing Associate, Ogier FUNDS 79 A forward looking funds industry By Ben Robins, Chairman, Jersey Funds Association (JFA) 83 Jersey’s international standing as a funds jurisdiction By Maxine Rawlins, CEO and Claire Keeney, Head of Funds, Hawksford Group CLEANTECH 86 Recognising the power of cleantech By Nigel le Quesne, Group CEO & Chairman, JTC

PRIVATE EQUITY 89 The rise of private equity in Jersey By Andrew Weaver, Partner, Appleby

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CONTENTS

Contents

TRUSTS 93 Jersey’s trust industry 30 years on By Alan Binnington, President, Jersey Association of Trust Companies (JATCo)

WEALTH MANAGEMENT 99 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

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WOMEN IN BUSINESS

As a woman in business, it would be great to see more women on Shelley Kendrick, the ‘network circuit’. Much has been written lately on the subject, Managing Director of particularly following the UK government report of Women on Boards executive recruitment specialist and HR as reported by Lord Davies where, interestingly, amongst other consultancy, Kendrick Rose, factors, it is noted that a lack of networking by women is a major discusses gender diversity contributing factor to their lack of success. Or maybe, as one female at senior level HR Director recently commented to me, it’s because the non fee- earning women in senior roles simply don’t get invited? THE BOARD APPRENTICE SCHEME The recently launched Board Apprentice Scheme has been initiated There is now some great work being done locally in the Channel by independent executive NED Charlotte Valeur. The issue of board Islands to represent women at senior level. The Jersey Community diversity is being discussed around the world, with a current Relations Trust (JCRT) is committed to supporting women to achieve emphasis on gender diversity. Many countries have implemented their career ambitions in business. In 2012, the Trust released the first quotas to force the issue; The Board Apprentice Scheme offers an report of its kind on the status of women in Jersey. The report immediate solution, by introducing apprentices into the boardrooms considered issues of inequality and discrimination affecting women of UK and Channel Islands companies. Kennedy Wilson Real and highlighted areas that require urgent action. Since then, in 2014 Estate Plc., a Jersey domiciled FTSE250 company, were the first to the Trust has held a seminar titled ‘Advancing Women in Politics & agree to take on a Board Apprentice in 2014. Public Life’ with a keynote address by The Right Hon Dame Tessa Jowell. The Trust has also initiated the ‘WIB Series for 2014, (Women Please contact us if you would like to find out more information and in Business) a campaign to support more women to achieve board contribute your talents to help create more diversified, better positions. 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 [email protected]

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PREFACE

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 J 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 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.

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PREFACE

Photo: Chris George While we are still operating against a backdrop of instability in the We are open to competition and inward investment, we are promoting global economy, we have worked hard to ensure we can come out of the innovation in new technologies and supporting Visit Jersey to bring financial crisis stronger than at the start. We have taken steps to new generations of visitors to appreciate the unique beauty or our increase our efficiency, to cut costs, to encourage investment and home. innovation, and we are sticking to our long term economic plans. We have established a steering group to advise on the actions required The difficult decisions we have taken in the past have put us in a to ensure Jersey remains a top-rated international finance centre. stronger position for the emerging economic recovery, our Government is working closely with Jersey Finance in the delivery of entrepreneurial spirit is alive and well, and we are ready to take bold, this vital work to ensure that our legislation remains competitive. 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 I am committed to ensuring we maintain our well-earned reputation means increasing productivity, encouraging inward investment and for quality financial services. We are maintaining a prompt response to dismantling barriers to trade. market needs, high standards and an innovative approach to new business opportunities. I look forward to continuing to make a positive One of our strengths is the enterprise of our people. Our latest figures contribution to international business flows and to steering our show that half of the businesses active in the private sector were single- community through the years to come. person undertakings. As we recover from a long and difficult recession, we remain a creative, innovative island community that has avoided Senator Ian Gorst complacency and is working hard to create jobs and growth.

Our Gigabit project is bringing the next generation of broadband Senator Ian Gorst is the . services to every home and business in Jersey. Superfast broadband will provide speeds of up to one gigabit, the fastest for a residential network Senator Ian Gorst was first elected as Chief Minister of Jersey on in the western world, and will underpin our push to promote digital 14th November 2011 and re-elected on 3rd November 2014. start-ups and to support the development of FinTech. First elected to the 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 “We have established a steering group to Department and in the Treasury Department.

advise on the actions required to ensure Senator Gorst is an accountant with significant experience in private Jersey remains a top-rated international client, private equity and retail fund sectors. finance centre. Government is working closely Married to Dionne, they have two daughters, Sophia and Lily-Mim. with Jersey Finance in the delivery of this vital Senator Gorst is actively involved in the church and serves as a Governor at . He has a keen interest in overseas work to ensure that our legislation remains development and he and his wife have travelled to participate in Jersey Overseas Aid Commission projects. He is also an Honorary competitive” Fellow of UNICEF UK.

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Gettingg Business and Technologygy IT is at the core of most businesses working as one today. But what technology is right Enable technology and business for your business? to work better together Improve efficiency of corporate With all this talk about Cloud, hosting, virtualisation, BYOD, Big Data and the like it can be IT resources difficult to know which way to go. Maximise value from past An IT partner should be able to help here. Business leaders doní t need an IT partner to sell to investments them – they need someone who will become an impartial and trusted adviser, just as they Embrace new technologies would select and use their financial adviser, legal services provider, and accounting professionals with confidence as specialist partners. Advisers who will consider their individual requirements, and understand their wishes, and constraints. Exploit new ownership and consumption models At Logicalis we seek to understand what a business needs, what would be a good fit and offer Enable new user experiences the customer greater choice in how they own and consume IT. and services Call Jersey on 288088 or Guernsey on 737000 for a free no obligation and Address security confidential discussion on how Logicalis can help your business to make the with confidence right IT Choice.

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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. J 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.

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FOREWORD

innovative way to consider applications for a banking licence. This “Innovation in the corporate structure of the approach strengthens ongoing marketing activity in the banking sector Jersey company is key to retaining a and it is anticipated that significant work in this sector will attract new entrants to the market place from more diverse jurisdictions in the competitive advantage whether it is for the future whilst maintaining the high quality of banks that operate in Jersey. purpose of market listings or alternatively for Wealth management continues to be one of the core offerings in the efficient corporate structuring for businesses Jersey financial services industry. In 2014, the Trusts Law celebrated its 30th birthday and Jersey now has the largest branch of STEP members of all types wishing to incorporate in Jersey” 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 The banking sector is another area of the industry that has become philanthropic wealth management in Jersey took a significant step subject to external change in the last year. The UK decision to forward in July 2014 when the Chief Minister took the Charities implement the Independent Commission on Banking’s (Jersey) Law 2014 through the States Assembly. In 2015 we will see the recommendations, particularly regarding the creation of ‘ring fenced implementation of that Law between the Government, regulator and banks’ and the subsequent decision not to allow non EU/EAA the industry and a further push to enhance this sector. There is a businesses to be part of the ring fence, has implications for the affected further amendment to the Trusts Law in the pipeline representing a banks in the Island. The implications of this issue vary from bank to year of joint industry and Government work during 2014 – I anticipate bank with the affected banks strategic proposals currently under that when consulted upon in 2015, Jersey will again be the talking point consideration by the Prudential Regulatory Authority in the UK. Some of the private wealth management world retaining our innovative and of the banks located in the Island believe the changes will have a world leading reputation in this area. positive impact on their businesses. This is not the only change that the banking industry is facing with further external regulatory pressure in Innovation has also been evident in the corporate world with the the liquidity and capital areas. eleventh amendment to the Companies Law being enacted in 2014. The Companies Registry has approximately 33,000 registered companies Last year saw a change in the licensing policy of the JFSC with a move and anticipates this number will increase in the coming years. away from the previous ‘top 500’ rule. This was done in partnership Innovation in the corporate structure of the Jersey company is key to Photos: Chris George with the Government and the industry and represents a new and more 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 Joe Moynihan businesses of all types wishing to incorporate in Jersey.

Jersey’s funds industry continues to provide a good growth story for the Joe Moynihan is Director of Financial Services for the States of Island. It is anticipated that this will continue, both in asset classes such Jersey. as real estate and private equity and in new areas – building on the This role provides advice to government Ministers on all aspects of initial success Jersey has had with the establishment of alternative asset financial services policy. In addition, working with Jersey’s financial class managers in the jurisdiction. One of the key findings of the services marketing and regulatory bodies, he helps ensure that the Strategic Jurisdictional Review was the need to simplify the funds financial services sector remains globally competitive. Prior to his offering in Jersey. Work has been ongoing for the last 12 months current position he had been with AIB Group for over 35 years through the partnership with the JFSC and with the industry through working in Ireland and Britain and has been based in Jersey since an expert working group. Further work on this will continue during the 1993. He was appointed Chief Executive Officer of AIB Jersey and coming year in the aim to find the best solution for Jersey. in February 2007, with responsibility for running the bank’s offshore operations in Jersey and the Isle of Man, setting strategic The changes I have touched upon here are only the tip of the iceberg as direction and representing the offshore business at AIB Group level. to why Jersey has a key competitive advantage in the financial services marketplace. We take pride in our roots as an international finance Joe is a graduate member of the Institute of Bankers in Ireland and centre of substance and by recent collaboration and innovation we are holder of an MBA from CASS University in London. He is a Past committed to place Jersey in the best possible position to take President of the Jersey Bankers Association and a member of the advantage of all viable opportunities. 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 T 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 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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INTRODUCTION

FATCA style agreements with the US and UK and having more than “a change to Jersey’s legislation in Novem- 44 tax agreements (both TIEAs and DTAs) in place, whilst Jersey’s ber designed to simplify and encourage the regulator has signed bilateral or multilateral MoUs with regulators in over 90 countries. establishment of hedge fund management With an ability to capture beneficial ownership information of businesses in Jersey is helping to bolster the companies on a central registry, Jersey is also far ahead of those available in other onshore and offshore jurisdictions including the jurisdiction’s standing as a centre for hedge UK.

fund business” 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. Regulation On the regulatory front, Jersey is focused on ensuring it has the Global frameworks in place to offer innovative products and services in a Something that has become clear from Jersey Finance’s programme robust environment, and early last year the industry welcomed the of engagement in overseas markets is that these high standards are publication of the Government’s Financial Services Framework, which becoming increasingly desirable on the global stage. proposed policy developments that reflect changes in the industry and the financial environment since the crisis. With that in mind, in 2014 Jersey Finance established a Shanghai launchpad office, allowing extended reach in Greater China, whilst at Of particular note in 2014 was the implementation of the AIFMD, and the same time capabilities were ramped up across the Middle East by Jersey’s regulatory changes in response to the Directive are already adding a senior business development director to bolster Jersey proving attractive to this fast-growing class of fund managers. Finance’s activities in the region.

Also in the funds sector, a change to Jersey’s legislation in November Over the coming months, maximising the additional resource in the designed to simplify and encourage the establishment of hedge fund Gulf region in order to capture significant private wealth and management businesses in Jersey is helping to bolster the jurisdiction’s increasingly funds opportunities will be vital, whilst there will also be standing as a centre for hedge fund business. a greater focus on targeting alternative fund managers in the US who could look to Jersey for expert, European time-zone fund service Meanwhile, Jersey has been leading the way in providing attractive and support. flexible charitable and not for profit vehicles for philanthropic purposes – and this strength was bolstered last year with the introduction of the In line with the findings of the Jersey’s Value to Africa report last year, Charities (Jersey) Law, which creates a robust and modern legal there will also be increasing efforts to build relationships with Sub- framework to support international philanthropic and charitable Saharan Africa where there are considerable outbound private wealth enterprise. and inbound infrastructure investment opportunities

In addition, the international drive towards greater transparency The breadth and depth of Jersey’s finance industry, combined with its continues and while respecting client confidentiality, Jersey is fully flexible, innovative approach, collective expertise and global outlook, supportive of moves towards greater international cooperation and is helping attract increasing levels of business from major markets remains committed to meeting global standards. worldwide, right across its banking, funds, wealth management and capital markets sectors. At a time when stability, corporate oversight Jersey was an ‘early adopter’ of the OECD’s Common Reporting and quality of service are key factors in the mind of the global Standard and is able to demonstrate a transparent and cooperative investment community, Jersey is well placed to continue to grow as a Photo: Chris George regime that more than meets international standards having signed 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 I 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 rate certainly features in the Bank’s thinking via its

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influence on inflation expectations, the monetary policy outlook like Brazil, have lacked the necessary reform impetus expected by primarily hinges on the degree of slack in the labour market and financial markets. prospects for pay growth. By contrast, the European Central Bank (ECB) announced its first quantitative easing programme in late Ultimately, those emerging economies that engage in credible structural January and should remain in easing mode well into next year. reforms will fare best and will be rewarded by an increase in market confidence. Meanwhile, fiscal agendas will be very much dictated by national circumstances. In the US, the drag of economic policy is likely to fade Second, this divergence in both monetary and fiscal policy outlook in 2015 as the budget deficit shrinks further, while in the Eurozone echoes differing fortunes in terms of growth profiles. The US is fiscal tightening will still amount to about half a percentage point of expected to contribute the most to the acceleration in global growth GDP. this year; we forecast that its economy will expand by over 3%, the fastest pace since the financial crisis. In the UK, the outlook for fiscal policy is highly dependent on the outcome of the general election, with the current consolidation Similarly, the UK domestic economic recovery is now well entrenched, programme liable to change in the event of a change in government. 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 In emerging regions as well, the need to address fiscal imbalances will the same time, we believe that the ECB’s monetary intervention, be high up on policymakers’ priority list. Countries such as Mexico improving credit conditions and a weaker euro should provide further have made considerable efforts to reform their tax system, while others, support to the Eurozone economy. We expect the region’s economic

“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”

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growth to accelerate to 1.2% this year. One key factor that could geopolitical risk might be at its highest level in years, but domestic risk improve this already positive outlook, in particular for the US and the is likely to have an equally unsettling effect on markets. Eurozone, is the rapid fall in crude oil prices as cheaper energy proves an impulse to households’ purchasing power at the expense of lost While Greece’s new government seems, so far, to be less confrontational revenues for energy producing countries. than initially feared, the rapid ascent of anti austerity parties within Europe hardly bodes well for the political stability of the region. Jersey’s economy, measured by gross value added, was stagnant in 2013 but probably began to grow in 2014. Because interest and exchange In the UK, the general election campaign has begun, and will produce rates in Jersey are the same as in the UK, if demand in Jersey grows at a increasing media noise once parties’ manifestos are published. Financial different rate than in the UK, it tends to be reflected, relatively quickly, markets will be alert to the new government’s plans around the fiscal in adjustments to labour market rates and property prices. Since position, and will have to assess the chance of ‘BREXIT’. average earnings are now rising faster than retail prices and house prices picked up very slightly in 2014, this effect is beginning to be An outright Conservative victory would deliver a referendum on EU visible. membership, with potentially momentous consequences for the financial services industry in the UK and Jersey if the UK were to leave After a protracted period of almost no economic growth, the Jersey the . Similarly, a Labour majority could impact the UK Government faces an important strategic decision. It seems likely that financial industry if the mooted windfall tax on banks were to be tax receipts were lower than Government spending in 2014, and that enforced. Overall, the risk of a minority government is real and this is this was because of a shortfall in receipts, not an increase in spending. likely to be one of the closest elections on record. 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 US is expected to contribute the the boom years, it would be possible to deploy its accumulated financial assets by investing in public assets that will support economic activity most to the acceleration in global growth growth in the longer term. this year; we forecast that its economy will So, how does this diverging world translate into a global asset allocation, and how should investors leverage the challenges and expand by over 3%, the fastest pace since opportunities that it presents? 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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OUTLOOK

“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 currency should lead to superior earnings growth. In turn, strategic allocation focused on the long-term might be complemented diversification outside of equities and fixed income might be achieved with tactical deviations to take advantage of shorter-term via alternative investments like hedge funds, although such investors opportunities. In our current tactical allocation, we favour assets from should be mindful of maintaining their exposure balanced across regions with the most robust growth backdrop, most notably the US. 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 Bill O’Neill 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 Bill O’Neill is Head of CIO Wealth far-reaching negative consequences for EM currencies and high grade Management Research UK at UBS. bonds. We have a neutral view on UK equities as the positive impact of weakening sterling should be balanced with the drag of falling Bill provides both UK specific commodity prices. macroeconomic and investment content to the UBS Global Chief Investment Office and This mixed picture in the domestic stock market might give investors represents the CIO office in the UK, the opportunity to diversify regionally into Eurozone equities, where a articulating the UBS house view for client Photo: Chris George positive economic growth momentum and the fillip of a depreciating 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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JERSEY: A STERLING REPUTATION

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. J 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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JERSEY: A STERLING REPUTATION

“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 Jersey’s specialist skills also extend to Islamic financial services. The decade. Island’s funds sector is a leader in Islamic asset management and there is expertise available to create special purpose vehicles, which can be Global wealth used with a variety of Shariah compliant capital market transactions In line with global wealth patterns in markets around the world and in including sukuk. Within the private wealth sector, Jersey trusts have response to moves towards greater transparency within financial services, been an attractive option to families and charitable, philanthropic Jersey has invested time and resources to ensure we continue to raise institutions in the Gulf region where the institution of the Waqf is not jurisdictional awareness in key markets. There is now a much greater dissimilar. Foundations, a more recent arrival on the Jersey statute, focus on certain African markets, whilst the Far East and countries in the have also begun to attract interest in the region. Gulf region continue to be a prominent focus for our efforts. A further illustration of the value and appeal of Jersey’s international Business wise, we are seeing a surge of interest by overseas investors in expertise and its gateway role is evident when considering business using Jersey in support of their real estate investment strategies. For undertaken with China and the potential to extend it into new areas. example, recent commercial activity has included a series of high profile Jersey fund and corporate vehicles have proved to be an attractive London property investments on behalf of overseas investors which have proposition for listing and one fifth of all Chinese companies that been transacted through Jersey. In many cases, instructions are from have listed in London have done so through Jersey. Going forward, London based lawyers and advisers who know that they can rely on their Jersey is well positioned to act as a supporting centre to London in the colleagues in Jersey to advise them on the Jersey regulated structure that RMB market, given its market access and experience in currency meets the investment objectives of their client. transactions.

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JERSEY: A STERLING REPUTATION

Stability and substance The popularity of Jersey entities such as the company, trust and “Jersey’s regulatory obligations are also a foundations, illustrate how the Island’s legal armoury has increasing priority and so too the importance of relevance to international investors. A mature but evolving legal system is further supported by a robust, well regarded regulatory platform engaging with regulators in key markets to within a jurisdiction demonstrating high levels of stability and substance, a tax neutral platform and a concentration of financial ensure the appropriate mechanisms for service expertise. 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 Robert Christensen MBE, is the Chairman of appropriate mechanisms for exchanging information are in place. Jersey Finance. There was considerable progress in that respect during 2014, with Memoranda of Understanding (MoU) being signed by the Jersey Robert is also the Managing Director of Volaw. Financial Services Commission with both China’s Securities Regulatory Commission and the Emirates Securities and Commodities Authority. Robert originally joined the law firm then known These agreements are part of an ongoing programme for Jersey, as Michael Voisin & Co. in 1981 and was demonstrating its commitment to developing frameworks for subsequently appointed as a director of its international cooperation and reinforcing its position as a transparent associated company Volaw Trust & Corporate and well regulated IFC, measures that assist in Jersey’s standing and Services Limited when it was first incorporated in 1982. Robert, reputation in international markets. Jersey’s regulator has now signed who has over 35 years of experience in trust and company bilateral or multilateral MoUs with regulators in over 90 countries, management services within Jersey, was appointed Managing complemented by a comprehensive and growing network of 44 Director of Volaw in 1988. Whilst he is responsible for clients international tax agreements including TIEAs and Double Taxation administered in all departments of Volaw’s business, his principal Agreements (DTAs). area of work centres on ensuring the effective management and control of entities established by Volaw’s clients. Furthermore, thanks to commitments made by Jersey’s Government, the jurisdiction continues to play a leading role in international efforts Robert is widely respected for his knowledge and expertise on the to promote cooperation and transparency in taxation and related corporate governance issues, especially in the area of fund issues, and the value of its contribution is now widely recognised. Last administration. Since the 1980s he has been at the forefront of the year, Jersey’s Government put regulations in place to confirm automatic development of Volaw’s Middle East client base and in been much tax information exchange with the USA and UK, outlined a package of involved with innovative Islamic finance projects. measures reinforcing the message that Jersey does not welcome abusive tax-planning structures and joined more than 50 countries in Berlin to Robert was instrumental in setting up Jersey Finance Limited, the sign up as an early adopter of the OECD Common Reporting Standard. promotional body for the finance industry in Jersey, of which he was appointed Chairman in June 2014. He is a member of the Quality Society of Trust & Estate Practitioners and holds the Trustee Diploma of the Chartered Institute of Bankers. Positioned geographically close to but with an unbroken constitutional link to the British Crown dating back more than 800 Robert was honoured in the Queen’s New Year Honours list for years, Jersey has the political stability and economic autonomy to 2015 by being appointed a Member of the Order of the British maintain the commercial conditions that appeal to international Empire (MBE) for services to charity. 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.

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’. I 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 Europe is also an important traditional market, where we have specifically, the City of London. A lot of our overseas business comes to sought to protect market access through contact with the Jersey via the City. It is also true that the UK economy benefits Commission, Parliament and Member States supported by our significantly from its close relationship with Jersey. Jersey Finance Channel Island Brussels Office. This has been supplemented by commissioned a report by Capital Economics which estimated that the direct contacts with Ambassadors and officials in London and visits benefits to the UK from financial activities in Jersey included to European capitals: for example, recent missions to Berlin, Helsinki approximately £118bn in funds upstreamed to UK banks, providing and Copenhagen, increased understanding of Jersey as a cooperative valuable liquidity to the UK economy: 180,000 jobs added to the UK financial centre. In Stockholm we were able to counter economy: £2.5 billion paid each year in UK tax: and, £0.5 trillion (yes, misconceptions about how private equity companies, including those trillion) of accumulated foreign investment. Over the last 15 months, in Jersey, operate. We also worked hard for the removal of Jersey greatly helped by the London office (established from a French blacklist of jurisdictions in 2013 and this was achieved in September 2013), we have consistently conveyed these positive by addressing mutual misunderstandings in relation to a small messages to parliamentarians, government officials, political advisers number of requests for tax information and by modifying our and members of the diplomatic community based in London. Jersey regulations. However, as is often the case, ministerial dialogue which ministers again attended the main Party Political Conferences, where takes place behind the scenes is significant in achieving these results. we participated in fringe events and held meetings with a number of The Island’s presence in France was subsequently enhanced by the UK ministers, shadow ministers, MPs and policy advisers. establishment in June 2014 of a joint Channel Island’s representative office in Caen. We are monitoring very carefully political developments around the possible referendum on the UK’s membership of the EU, including the A further key element of Jersey’s common policy on external consequences for Jersey of a BREXIT (British withdrawal). We plan to relations is ‘enhancing recognition of Jersey’s commitment to protect Jersey’s existing relationship to ensure stability and continuity international standards’: our policy is to implement international for those businesses that engage in Europe. 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 “Jersey Finance commissioned a report by a common, global reporting standard. Capital Economics which estimated that the My ministry has been helping to develop the Island’s international reputation as an outstanding place to do business and it will come as benefits to the UK from financial activities in 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 Jersey included approximately £118bn in hosted a visit to Jersey by the Arab Ambassadors’ Council in May 2014 and in the same year Ministerial colleagues and I visited the funds upstreamed to UK banks, providing United Arab Emirates, Qatar, and Saudi Arabia. Our contact with senior political figures in these countries has reinforced their already valuable liquidity to the UK economy” 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 Senator Sir Philip Bailhache 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 Senator Sir Philip Bailhache is the Minister for economic and political matters, and have also extended into educational External Relations and Assistant Minister for and cultural fields: for example, there have been regular exchanges Education, for the Government of Jersey. between and Ba Yi school in Beijing, which President Xi Jinping attended as a student. This demonstrates that Jersey is comm- Sir Philip Bailhache was Bailiff from 1995- itted to a long-term, broad relationship with China and we are hopeful 2009 and served as Commissioner of the that Jersey’s trade with China will see an upturn in the next year or so. Royal Court and Judge of the Court of Appeal. He stepped down in July 2011 to run Elsewhere in this publication, you will see reference to the report for office and was elected on 14 November 2011 and subsequently appointed Assistant Chief Minister. In commissioned by Jersey Finance on Jersey’s Value to Africa. The September 2013 he was elected as Jersey’s first Minister for Ministry for External Relations sponsored a roundtable discussion External Relations and re-elected for a further term in the 2014 hosted in the Houses of Parliament, among MPs, NGOs, representatives Senatorial elections. He was appointed as Assistant Education from the financial community and diplomats, looking at the positive Minister in November 2014. relationship between international finance centres such as Jersey and developing countries in Africa. I held meetings with heads of African He is also Chairman of the Governing Body of the Institute of Law, Embassies in London and hosted a visit to Jersey by the Nigerian High the founding editor of the Jersey and Guernsey Law Review and Commissioner. In addition, Senator Philip Ozouf attended a global the founder of the Jersey Legal Information Board. meeting on mining in South Africa in early February 2015, promoting the capability of Jersey to provide a stable framework for global mining companies.

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. J 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, , 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.

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 Regulation deepen dialogue with the most relevant firms. Alongside the shifting market for wealth accumulation and the wider demands for infrastructure investment, it is now undoubtedly the case Another key market for Jersey is the Gulf and it is now more than 12 that investors and their advisers are increasingly looking not only to years since a Jersey Minister first visited the region. Since then, there has jurisdictions that can clearly demonstrate high levels of stability and been regular engagement at ministerial and at regulatory level across substance but those that have an appropriate approach to most GCC states, together with an industry presence led by the opening confidentiality when formulating strategies. The rising tide of of a Jersey Finance office several years ago. In terms of the regulatory regulation in financial services has accelerated since the global financial developments, the JFSC has signed bilateral MoUs, covering information crisis in 2007 and jurisdictions have needed to respond accordingly to exchange and cooperation, with the Central Bank of the UAE and the maintain their competitive position. Dubai Financial Services Authority, whilst most recently an MoU was signed with the Emirates Securities and Commodities Authority. Jersey remains one of the best regulated international finance centres globally, a status acknowledged by independent assessments from some 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 “Jersey signed a Memorandum of deepen our relationship with the region. Jersey’s financial service offering is highly attractive in this region and this appointment provides Understanding (MoU) in 2014 with the China us with increasing capabilities to reach and communicate this into new Security Regulatory Authority, the latest move markets. From a financial services perspective, today we are seeing growth in in a series of signed agreements which Jersey’s private client, funds, banking and capital markets sectors right across the region. As outbound and inbound investments in the Middle include bilateral and multilateral MoUs with East become more and more sophisticated, Jersey is seeing growing interest in its expertise for structuring property investments in the UK, regulators India, UAE and Qatar” 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 “Jersey Finance for the first time hosted our platform. own roadshows in both the Asia Pacific and As a further indication of our commitment to these regions, Jersey Middle East region, arranging a series of Finance for the first time hosted our own roadshows in both the Asia Pacific and Middle East region, arranging a series of breakfast and breakfast and lunchtime events in Hong lunchtime events in Hong Kong, Kuala Lumpur, Singapore and Dubai. These were well attended by key gatekeepers and other intermediaries Kong, Kuala Lumpur, Singapore and Dubai” 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 Richard Corrigan 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 Richard Corrigan is Deputy Chief Executive of have to come from foreign direct investment. By providing protection Jersey Finance. for investors, efficient cross-border investment pooling, robust regulation and tax neutrality, IFCs like Jersey are well placed to make an Richard joined Jersey Finance as Global head important contribution to Africa’s economic growth. of business development from Barclays where he was most recently a Director within the Wealth and Investment Management Jersey already has significant experience in advising clients on division. Through his extended team in transactions in a number of African countries including corporate, London, United Arab Emirates, Hong Kong funds, project and infrastructure work and has long established links in and India representative offices Richard helps to support member advising clients on wealth management and estate planning. firms in a number of international growth markets and foster Approximately 9% of assets looked after by trusts in Jersey have come closer working relationships with a wide group of industry from African sources and a number of African banks have a presence in stakeholders. Jersey. We will be working to build on those links, highlighting Jersey’s skills in corporate governance, experience in handling secure cross A qualified banker, Richard has extensive experience managing border transactions and a range of specialist wealth management business units, coverage teams and clients within international vehicles. corporate banking and wealth management businesses. He has supported a wide range of private clients achieve their business It is the same attractive qualities that we intend to promote in other key and financial objectives both with Barclays and previously at markets worldwide where growth is evident such as Russia and Latin Royal Bank of Group where he was latterly Regional America. Despite the economic difficulties in Russia, for example, there Director within the Financial Institutions Group. remain significant outflows of first generation capital and clients based there who are keen to internalise their investments are looking for a During his career Richard has acted as board director for trust well regulated hub in which to do so. 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 well- regulated 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

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

Photos: Chris George Committee member of the Jersey Funds Association

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John Willman: The global economic environment continues to be simple model of the past which collected deposits in Jersey and volatile, despite signs of recovery in some countries and regions. upstreamed them to London. 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 Paul Savery: From the point of view of the banking industry, the word financial crisis. So I’d like to start by asking each of you to say how 2014 to describe 2014 would be resilient. There have been a lot of headwinds looks in retrospect for Jersey’s financial services industry and what the which impact on profitability, in particular the ongoing low interest rate challenges are for 2015? 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 Geoff Cook: Ever since mid-2013 we’ve seen a gradual build-up of near future. There is also the mountain of regulations coming through, confidence and business activity in our major sectors – funds, private as John Harris said, adding to the cost of doing business. But the client business and company formation and listings. Banking has been industry is supportive of the transparency agenda which is putting us in something of an exception but even then it has been level. We’ve still a better place to do business. 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, In addition to rising compliance costs, we all face the challenges of breaking the back of some really quite difficult challenges pretty well. increasing efficiency, providing more digital online services and So I think that from a business point of view, we’re in good shape. automating our operations. But there has been a big improvement in the capital position of the Island’s banks, and that reinforces the quality We had an election in 2014 under Jersey’s new electoral system which agenda for Jersey. From the Barclays point of view, we’re very confident naturally created some uncertainty locally. But that was navigated about our business model and our continuing commitment to Jersey. 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 Lorraine Wheeler: In the trusts sector, there is continuing partnership between the industry, the government and the regulator is consolidation and I don’t think that will stop yet. With all the regulatory strong and positive. 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 John Harris: I’d echo what Geoff just said but would emphasise that industry on how Jersey can collectively move forward, with a lot more on the intense regulatory agenda, there are still a number of trains to communication between business, the government and the regulator. 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 “Another key issue is how the banks do things for market access reasons that we might otherwise not wish to do. affected by the UK requirements to ring-

Another key issue is how the banks affected by the UK requirements to fence their retail operations will change 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 their models of how they serve their clients into force until 2019 but in reality it’s already happening and each here within their groups” banking group could evolve in ways that are quite different from the

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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 from new markets, particularly in Asia and the Middle East. preparations for implementing international agreements such as that for Traditionally, both of those parts of the world tended to look for a the US Foreign Account Tax Compliance Act (FATCA) legislation, the cheap and cheerful solution and I think they’ve now realised that if UK’s equivalent arrangements and common reporting standards. We have you’re going to structure your affairs properly, you need to have already collected a lot of the information we will be required to keep on something that has real substance, stands up to scrutiny and is well- file, while other centres are just starting and may lose sight of their clients managed. Our trust law was 30 years old last year and it has provided as they do so. an excellent framework for the industry – one that has been copied by lots of other jurisdictions. We have a long track record in administ- Jenny Swan: 2014 was a challenging year for the funds sector, especially ration and a wealth of experience, and we’re seeing a flight to quality. given the uncertainty in the run-up to the implementation of the EU’s Alternative Investment Fund Managers Directive (AIFMD). At J.P. Nicholas Davies: I’ve recently come to Jersey after eight years in Morgan, we have spent a lot of time with our clients helping them to Moscow, where my focus was on finance and capital markets navigate through the new requirements. It is important that Jersey be seen transactions in Russia, other former Soviet states and the Middle East – to be ahead of the curve with an AIFMD-compliant regime. Thanks to emerging markets that Jersey’s finance industry is targeting. In my the collaboration between the government, regulator and industry, Jersey previous work, I saw Jersey growing in popularity among emerging was able to launch its AIFMD-compliant regime very quickly. Also a key market clients as a jurisdiction for company listings, securitisation focus for the sector was ensuring the right stakeholders were aware we vehicles and other structures. One of the key drivers in that was the remained open for business under the new regime. And the hard work recognition by those clients that they need the high standard of paid off: Jersey’s fund assets are showing a strong recovery with asset regulation that is available in centres such as Jersey. value now exceeding £200 billion. Also encouraging is the fact that we have not seen any migration of business to EU domiciles. John Willman: One of the big developments in 2014 was the publication by the government of the Financial Services Policy Alan Binnington: There has been a lot of new trust business flowing in 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 inside the ring-fence that protects retail customers, so the regulator must Island. What was the rationale for that, John? 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. John Harris: Previously, only banks in the top 500 worldwide could And I have faith in the ability of Jersey’s industry, regulator and operate in Jersey. The supervisory regime was based on licensing banks government to retain the quality of the banking stock. that were too big to fail – systematically important banks which the home authorities would not let go under. But that world has gone, John Willman: How much progress has been made in focusing on the because taxpayers are no longer prepared to bail out banks. That is why new international markets identified as targets in the 2013 McKinsey capital requirements for systematically important banks have been report commissioned by Jersey Finance? raised to increase their loss-absorbing ability. And if they fall into difficulties, it is the bondholders who have to bail them out. Geoff Cook: The McKinsey strategy was to maintain and improve market share in flat or declining markets, principally in Europe, while So Jersey must take more responsibility for supervision by making a focusing on the growth markets – and we’ve been in implementation risk-based judgment as to whether a bank should be allowed to do mode ever since. We’ve got a launchpad office now in Shanghai and business on the Island. If it’s going to be serving retail clients, we’re presences in Hong Kong, Dubai, Mumbai, New Delhi and London, with likely to have a very different view than if it isn’t – if it’s a specialist other personnel active in mature Europe, Russia and increasingly in Africa. private wealth institution used by very high net worth individuals, for example. We would also look at whether the bank could put pressure We are also prioritising some effort in North America during 2015 to look on Jersey’s deposit protection scheme. We’ll probably focus on the top at how we can be a portal for US investment capital coming to Europe. 1,000 banks but we will look at almost any bank, analyse the risk and We’re now quite global, with boots on the ground in all of these markets be prepared to manage it. and the proportion of growth market business in our book is increasing quite fast. We also find that emerging markets are starting to move Paul Savery: The change is inevitable, forced by legislation since the towards us on issues such as governance and regulation, recognising the crisis. The local operations of the large UK banks in Jersey will not be 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.

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 Jenny Swan: In the funds sector, we collaborate with Jersey Finance they have good processes for taking on clients, monitoring them, taking concerning target markets, events and trips. However nearly half the action when things don’t work out and keeping the reports that show money invested in Jersey funds comes from the EU with 30% from the appropriate action has been taken. UK – staying close to the London gatekeepers who influence choice of fund domicile continues to be a key focus for our funds business. We Alan Binnington: One of the benefits of the Value to Africa report is have recently added the US to our target market list as US managers that it identified a higher risk region in respect of which investors now appreciate reverse solicitation into Europe won’t always work for would choose somewhere like Jersey as the place to base their them. investment structures. They can see that we have very robust regulation: people here take compliance very seriously and will be on the lookout It is not all about target markets for the funds sector. Jersey needs to be for the inevitable red flags that arise in higher risk markets. on the front foot when opportunities come up, especially niche opportunities where we can get a head-start on any new and innovative And if you look at areas of the world that have suffered from political type of fund product. For example, the industry has developed instability or a breakdown of the rule of law, people who have been expertise in debt funds, a growing sector for the investment industry. successful in them are looking for a safe jurisdiction that respects and With interest rates continuing to remain low, investors are searching for enforces the rule of law. We have a strong judicial system and a yield and as the supply of bank credit continues to shrink, the fund tremendous amount of professional expertise on the Island. I think this industry can fill the demand. Additionally we need to continue to reassures clients from such countries and also their investors that their encourage existing and new managers to bolster their presence and assets will be looked after. substance in the Island. Nicholas Davies: Jersey is really in a sweet spot on Africa. When you Nicholas Davies: As a new boy to Jersey, I am heartened by the look at investors there, they use Jersey not for tax reasons but first and decision to target growth markets but I believe it will be important to foremost for asset protection. Inward investors want a safe, legally persevere with countries that may be having economic or political robust vehicle to invest in and that works for both sides.

Paul Savery: Jersey Finance has done a great job with a report that “if you look at areas of the world that have 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 suffered from political instability or a business and it’s judged to be really good. It establishes Jersey as an alternative and/or complementary route to established centres such as breakdown of the rule of law, people who Mauritius for inward investment.

have been successful in them are looking 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 for a safe jurisdiction that respects and met the major South African banks in Johannesburg. Over the last year, I’ve heard ministers talk about mining and its importance to Jersey enforces the rule of law” 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 jurisdictions pioneering the EU arrangements and one of the 44 early family charitable structures. adopters of common reporting standards that now cover 90 countries.

Lorraine Wheeler: As we discussed earlier, Jersey is now targeting We made a serious commitment to David Cameron’s G8 agenda on tax emerging markets and philanthropy isn’t as high on clients’ lists of transparency and there has been a consistent message that Jersey priorities in such markets as it is in the UK and the rest of Europe. embraces and is committed to sound business practices, good conduct But as emerging market clients grow in sophistication, our regime and transparency. will appeal to families who wish to be involved in philanthropy. John Harris: On the UK demand for public registers of beneficial Nicholas Davies: That is certainly true: I foresee increasing ownership, I detect a movement towards Jersey’s model of a central interest in philanthropy in Gulf countries, which will find ready- register that provides information to overseas authorities on demand. made answers in Jersey combined with valuable experience of We also have a requirement for regulated trust service providers to philanthropic activities. It is positioning Jersey very well for wealthy keep such information up-to-date. And the Financial Action Task Force individuals and rich families – and also corporates in emerging which sets the rules on money laundering worldwide has accepted the markets which face public pressure to do more in the way of Jersey model as one of the models it can work with. philanthropy. We were criticised recently by the UK Labour leader over the lack of a John Willman: Transparency of ownership has become a big issue public register. But the US, UK, France and Germany don’t yet have in international debates over financial centres, with UK pressure on public registers, while our central register is already up and running. Dependencies and British Overseas Territories to establish public registers of beneficial ownership. Where does Jersey Alan Binnington: The outstanding issue is public access to the stand on such initiatives? register. I believe that the Jersey model strikes the right balance between capturing reliable information which is available to authorities 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, anti- “We certainly need to continue targeting gate- money laundering legislation and mechanisms to deal with both. We are now one of the few jurisdictions to capture ultimate beneficial keepers in London because a lot of emerging ownership information, with an obligation to check inflows and make sure they are not proceeds of crime or evasion of tax. And we market business still goes through there. But have regulation of corporate service providers to ensure that things are done properly. you also have to invest in going out to meet

Add to that our early adoption principle for measures such as tax the people in growth markets whose share of information exchange on request in 2002, being one of first countries to commit to implementing the US FATCA requirements global business will increase in the future” and their UK equivalents, membership of the G5 group of

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ROUNDTABLE

through established gateways and respecting individuals’ privacy Our fund vehicles operate on a neutral tax platform: Jersey doesn’t which is a fundamental human right. I cannot see what is to be tax the fund, people from all over the world can invest in it and they gained by having public registers of beneficial ownership, particularly account for any tax on their returns in their home countries. But in jurisdictions such as the UK where the information on the register countries worried about BEPS, such as the UK, are considering will be of doubtful validity because the industry providing the legislation outside the international negotiations over a information isn’t regulated. comprehensive overhaul, which could lead to profits from and infrastructure investments from jurisdictions like Paul Savery: The British Bankers’ Association has recommended a ours being subject to taxation. private register for the UK. It highlighted that the intentions behind a public register are good but there are many potential issues for We believe major investors will not invest in such countries if they individuals which need to be understood. But if they are going to be have to pay taxes on the returns that they cannot offset through introduced it should be done consistently on a level playing field – double taxation agreements. They are likely to decide to invest in otherwise there will be all sorts of problems over regulatory arbitrage countries in Asia and the Middle East that don’t choose to levy such and jurisdiction arbitrage. taxes, which would reduce much-needed foreign investment in UK infrastructure. Remember, the Jersey’s Value to Britain study Jenny Swan: Beneficial ownership is not such a big issue for the estimated that about one pound in every 20 of foreign direct funds sector. Jersey is a mature jurisdiction with many years of investment into the UK comes through Jersey. experience in legislating and regulating on this issue. We have a great story to tell. 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 John Willman: There has been a lot of focus in recent international these initiatives grow legs very quickly. This issue is very much one summits on Base Erosion and Profit-Shifting (BEPS), where it to watch. appears that large multinational companies are moving their tax liabilities to low-tax jurisdictions, weakening the tax bases of the John Willman: Finally, Geoff, have Jersey Finance’s efforts to countries where they mostly operate. Is Jersey exposed to measures to explain the Island’s role as an international financial centre to UK curb BEPS? stakeholders and the wider world produced results?

John Harris: Profit-shifting takes advantages of double taxation Geoff Cook: The UK coalition government has certainly become agreements between countries to shift profits to countries where they much more supportive of Jersey – I think on the back of the Jersey’s are taxed at low or zero tax rates. Jersey doesn’t have a network of Value to Britain study we published in 2013, supplemented with the double taxation agreements, so we are not active in such practices. I’m Moving Money report in 2014. There are now a number of MPs reasonably relaxed on this generally. speaking up for our kind of financial centre in quite an informed way. In a recent parliamentary debate, the Financial Secretary to the Geoff Cook: The concerns at the centre of this debate are over Treasury, David Gauke, said that we are delivering on our which countries have the right to tax the profits of companies that commitment to international standards and that Britain can’t ask us create substantial value by trading in many different markets. The last to do things that are beyond international norms. time that the international taxation arrangements governing such trade were seriously overhauled was in the 1920s, and the digital age We are a small nation which needs market access to lots of countries has added complexities which have put the issue back on the agenda. around the world and the political environment remains volatile. But redesigning the arrangements could have some implications for The political standoff in the US, instability in Europe and the threat Jersey if not done well. of a Greek exit from the Eurozone provide plenty to worry about, as does the looming general election in the UK. Nonetheless, in terms Our business is mainly to raise capital round the world and invest it of what we can influence and control, I think we’re in excellent where it can be put to work creating jobs and growth. It is principally shape. investment in assets, rather than trading, which is why we don’t have a network of double taxation agreements. Those treaties were Our positioning as a cooperative and transparent jurisdiction of designed to stop double taxation but the authorities have become substance has drawn active support from the UK government and concerned about double no taxation – no tax is collected anywhere by positive commentary from influential organisations such as the IMF, anybody. It could be a problem for Jersey if funds investing across OECD and World Bank. I believe this sets us apart from our borders are unintentionally ensnared in regulation taxing investment competition as a valuable partner providing the essential investment flows that are doing a lot of good. 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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LEGAL SYSTEM

Photo: Chris George 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. J 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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LEGAL SYSTEM

Photo: Chris George

does not bind Jersey to international obligations without the consent of developing jurisprudence in this area. Our cases are quoted extensively the Government of Jersey. We are not part of the European Union. beyond our shores and indeed, a former judge of the highest court of the Instead, we have a special relationship with the EU, being treated as United Kingdom referred to the judgment in a leading Jersey case on part of the European Community solely for the purposes of free trust law, Re Esteem Settlement, as ‘magisterial’.With reference to some movement of goods. 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, Whilst our legal and constitutional arrangements may seem complex to “it may be that the is developing faster, and in a better those not familiar with them, they provide some significant advantages. direction, than English law.” In respect of our legal system, for example, whilst judicial precedents have persuasive force, they are not binding as they would be in a Whilst we have the advantage of our close relationship with the UK and common law jurisdiction. This enables the Courts to promote being part of the , we can make our own decisions and have consistency but with the flexibility to be able to depart from precedent the agility to be able to develop our legislation swiftly. if necessary to deliver justice, for example, if common practice has evolved since the matter was last judicially determined. Our reaction to the introduction of the Alternative Investment Funds Management Directive (AIFMD) is an apt illustration of this: we were Furthermore, whilst the concept of a trust is an unfamiliar one in many the first non-EU jurisdiction to announce that we would be offering a civil law jurisdictions, our mixed legal system has embraced trusts to fully compliant AIFMD regime in relation to European business, as well the end that Jersey’s trust industry is one of the pillars of our financial as retaining our existing framework for the rest of the world. services industry. Consequently, our Royal Court is at the forefront of 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 “Whilst we have the advantage of our close Ministers and the legislative assembly and the Attorney is ultimately responsible for all prosecution decisions. The Attorney also has particular relationship with the UK and being part of the statutory functions, such as being responsible for responding to requests for mutual legal assistance from other jurisdictions. In performing those British Isles, we can make our own decisions duties, I am conscious of the demands that our position in the international financial services industry has on our legal framework and and have the agility to be able to develop our the importance of our law and practice continuing to evolve in line with legislation swiftly” 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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LEGAL SYSTEM

“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 processed as quickly as possible. Since this team was established, the have anti money laundering legislation, Jersey remains one of the few time it has taken for primary legislation to gain Royal Assent has offshore financial centres to have successfully used it to prosecute reduced significantly. This helps our legislature to be agile in response several cases. Furthermore, we also collaborate with international to changing circumstances and a developing financial services industry. partners to ensure that people do not profit from the proceeds of crime, often working with foreign law enforcement agencies to freeze As Attorney General, I am proud of how our legal framework has and assist in returning very substantial assets derived from corruption evolved and developed in order to cope with the demands of or other criminal activities. globalisation. Our legal system has provided a strong foundation upon which our financial services industry can develop. 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 Timothy Le Cocq QC maintain and develop our regulatory standards. In our last IMF assessment in 2008 we were classed as being compliant with 44 of the Timothy Le Cocq QC is HM Attorney General 49 FATF recommendations, ranking us in the top division of finance for Jersey. centres. However, as international regulatory frameworks continue to evolve, significant resource is dedicated to working both internationally Following a career in private practice, in and domestically to ensure that we maintain the highest standards. For 2008, Timothy Le Cocq QC became Solicitor example, the UK’s ratification of the UN Convention on Corruption General for Jersey and was made Queen’s was extended to Jersey in 2005 and most recently, it has been confirmed Counsel. that the UK ratification of the Palermo and Strasbourg Conventions, dealing with transnational organised crime and money laundering In November 2009 he succeeded William respectively, will be extended to Jersey in the very near future. Bailhache, QC as Attorney General for Jersey, an office which he currently holds. We need responsive legislative development to keep pace with the speed of change. A dedicated team in my department advises on new Mr Le Cocq retires from the office of Attorney General at the end legislation, assists with drafting instructions and liaises with the UK to of March 2015 and at the beginning of April is to be sworn in to ensure that any primary legislation, which requires Royal Assent, is office as Deputy Bailiff of Jersey.

Photo: Chris George

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Decoding Regulation

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REGULATION, SUPERVISION & COMPLIANCE

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. I 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 Moreover, through its licencing, regulation and supervision of Trust of regulatory developments to which Jersey must pay attention. The and Company Service Providers (TCSPs) it has a supplementary first of these is the need for the jurisdiction to conduct (as part of the mechanism to bolster the effectiveness of its central register by way next round of assessments) what is known as a National Risk of clear unambiguous and demanding requirements on TCSPs to Assessment (NRA) in AML/CFT terms. This is a sweeping, all- identify the true beneficial owners of all structures for which they encompassing, thorough analysis and validation of the risks in the act, including all parties to trust arrangements. In this respect Jersey AML/CFT space with which Jersey as a jurisdiction is faced. regards itself as being at the vanguard of current best practice in this area. Beneficial ownership Within this debate there are two other major issues which I feel to be Second, Jersey is a member of a Group of International Finance worthy of mention. First is, where Jersey stands in respect of the Centres Supervisors (GIFCS) which groups together a number of international debate on the central register of beneficial ownership of smaller jurisdictions who are, amongst other things, particularly companies and identification of beneficiaries to trusts. This has found active in the trust and company service provider sector. Nearly all of expression in debates amongst bodies such as the G20, G8, the these member jurisdictions follow to some extent the regulatory European Union (4th Money Laundering Directive). Jersey already has model that Jersey has had in place over many years of overseeing and a central register of beneficial ownership of companies and has had for supervising TCSPs. In this respect, in October 2014, the GIFCS many years. 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 “Jersey is a member of a Group of international standard in this particular space. International Finance Centres Supervisors Regulatory change I have concentrated thus far on developments in which Jersey can (GIFCS) which groups together a number of claim high ground in developing relevant international regulation itself. However, across the world regulatory change has become the smaller jurisdictions who are, amongst other new normal. This impacts smaller centres rather dramatically in that we must work out what is relevant, appropriate and assimilable in things, particularly active in the trust and terms of international regulatory developments and import those into our respective centres in pragmatic ways which allow industry company service provider sector” 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 “we must work out what is relevant, appro- Group of which they form part. This has implications for Jersey’s up priate and assimilable in terms of international streaming model to UK ring-fenced entities and various plans for affected banks in the UK have now been submitted to the Prudential regulatory developments and import those Regulation Authority (PRA) in London, which in time will probably change the way in which the Jersey branch or subsidiary does into our respective centres in pragmatic ways business with the parent. This need not necessarily be a bad thing but it will be a different thing. which allow industry to continue to function,

Another clear indicator of international regulatory action impacting maintain access to overseas markets whilst upon the Island is the agenda of the EU. Here there are numerous respecting the new standards” 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 supervisory regime in the increasingly demanding financial services Fund Management Directive (AIFMD), whereby ESMA will conduct world that we now confront both in Jersey and internationally. an initial assessment of a sufficiency and suitability of passporting for ‘third countries’ (i.e. USA, China, Jersey) and make I hope these few lines have somewhat enlightened on the dynamic but recommendations to the European Commission and Member States challenging regulatory scene with which Jersey is faced. At the by summer 2015. Jersey is working hard to ensure that it is on a list Commission we are proud to play the part that we have in Jersey life of priority jurisdictions to be assessed and reviewed in this respect and look forward to continuing to be able to do so into the future. and believes that it has every technical base covered for being positively assessed.

Clearly further major significant challenges lie ahead, as is also the John Harris 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 John Harris is the Director General of the Alternative Investment Funds but this time for the generalised Jersey Financial Services Commission investment management space for both retail and professional clients (JFSC). within the EU. Again MiFID 2 has a third country dimension and thus affects Jersey. At the time of writing, both Jersey and Guernsey From 2002 to 2006, John Harris held the have made an in principle decision to pursue a similar equivalence position of Director - International Finance in the States of Jersey Chief Minister’s type outcome in respect of MiFID 2 that they did with AIFMD and a Department where he had responsibility for all great deal of work will be needed to be able to ensure that this is both aspects of the government’s policy on the effective and recognised by the relevant EU authorities. maintenance and enhancement of Jersey’s position as an international finance centre. I would briefly mention from last year something which has continued throughout 2014, namely Jersey’s own evaluation of its From 1998 to 2002 he was Chief Executive Officer for NatWest funds regime following the recommendations of the 2013 McKinsey Offshore with responsibility for offices in Jersey, Guernsey, Isle of review. This is about whether or not streamlining and simplification Man, , Cayman, and the Bahamas. He spent 22 of the regime could be undertaken and various proposals have been years working for NatWest Bank during which time he held developed and advanced by the Jersey Financial Services Commission management positions in France, Switzerland and Singapore (JFSC) and Jersey Government and increasingly shared with industry amongst others. John Harris obtained a BA (Hons) at Exeter practitioners. The JFSC will continue to work avidly with University and is a fellow of the Chartered Institute of Bankers. Government and industry on this project in 2015.

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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REGULATION, SUPERVISION & COMPLIANCE

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’s- I Mat 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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REGULATION, SUPERVISION & COMPLIANCE

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 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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REGULATION, SUPERVISION & COMPLIANCE

financial services business to put defences in place to prevent and thus suspected tax crime was included in the scope of the reporting forestall money laundering. In addition to creating criminal offences regime from its introduction in 1999, and remains so today. for failing to have certain measures in place, the Law also created criminal offences in respect of assisting another to retain or conceal The Jersey Financial Services Commission was charged with the the proceeds of crime, failing to report suspicious transactions or responsibility to ensure financial services businesses complied and tipping off. issued an extensive handbook setting out the means by which it expected licence holders to meet their legal obligations. The scope of the new Proceeds of Crime (Jersey) Law 1999 was sweeping – requiring transactions to be reported wherever a financial Meeting and surpassing international developments services employee knew or suspected that moneys may be the proceeds Post the 9/11 attacks in 2001 and again in 2008, Jersey further upgraded of any crime, which, had it been perpetrated in Jersey, would be a crime its regime to adopt the nine Special Recommendations mandated by punishable by more than one year in prison. No proof of an offence is the Financial Action Task Force as means to combat the financing of needed, nor is it necessary to identify what the crime might be, as the terrorism, including extending it to a far wider range of reporting obligation triggers on reasonable suspicion that the moneys may be the businesses and professions including lawyers, accountants, high value proceeds of crime. Importantly, the Law contains no ‘fiscal carve out’, 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 “Conducting sufficiently thorough due maximum international standard and in 2009 Jersey received the highest ratings in any assessment undertaken by the International diligence to address risks, satisfy legal Monetary Fund of anti money laundering regimes at that time. Jersey obligation and regulatory review, whilst at truly met international standards. Enforcement of the regime the same time keeping disruptive or ill-timed Jersey has adopted a tough position on enforcement of its standards with regard to anti money laundering. Protecting the reputation of the client questions and costs to a minimum, is Island as a well regulated international financial services centre, is an important part of the objectives of the Island’s Government, police and a serious challenge” regulatory authority. However it is an objective which Jersey’s high quality financial institutions share, sharing equal concern in

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REGULATION, SUPERVISION & COMPLIANCE

maintaining expectations of legitimate client confidentiality, whilst monitoring and undertaking period reviews. However outsourced willingly playing their part in the global fight against financial crime functions bring outsourcing model advantages such as service level and terrorist financing. standards, fixed cost, easy scalability, enhanced response time and audit trail. Jersey has not held back on its prosecutions or regulatory sanction of those businesses and individuals who have not maintained adequate Conclusion defences against money laundering. As the perception of crime changes, and global financial flows only increase; as the international spotlight turns with ever more intensity Finding the next level on ultra high net worth individuals and the jurisdictions they choose There is a new fiscal morality in play, a demand for increased to safeguard their assets, so international financial services centres transparency, better communication and cooperation. An increase in must increase their capability, transparency and cooperation. As a the need for mature jurisdictions such as Jersey to demonstrate they result of these pressures, the sophistication of risk management operate responsibly, as fully engaged global partners, committed to becomes even more central. their international commitments. This is not a new or uncomfortable positioning for Jersey but the right place for a long term, sustainable Few international financial centres share Jersey’s good fortune in finance centre, built on track record and solid skilled professionals. having the infrastructure, judiciary, regulatory framework, skills pool, track record and sheer strength – not to just meet these increasing Today there is a palpable shift in the focus of many Jersey businesses. standards but to stand at the very forefront of excellence. 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 Helen Hatton competitive price and the constant pursuit of good governance and need to embed ethical values in all staff/client interactions. Helen Hatton is a senior executive with over Many firms would list ‘attracting, developing and retaining the right 25 years board level experience and is the staff’,‘delivering assignments to excellent customer satisfaction’ and founder and Managing Director of Sator ‘managing risk’,as their top three objectives. These objectives run Regulatory Consulting Limited, a Jersey based business offering compliance and parallel to the needs of most clients. This parallel represents a regulatory advice, training and staffing community of interest and alignment of objectives which speaks well solutions to regulators, international standard for Jersey’s future. setters and financial services businesses worldwide. Financial services businesses and private clients engage consultants in a range of mandates focused around these objectives, all ultimately Educated at Hurst Lodge, Sunningdale and St Wilfred’s, Exeter designed to improve the customer experience, directly or indirectly followed by Plymouth University, Mrs Hatton lectured in Business through improved governance, risk management and compliance. Studies in further and higher education institutions in the south west of England before joining American Express Bank in 1989 to Practical issues of compliance give private clients wealth advice. In 1992 she was appointed An excellent example of the drive to service quality, intersecting with director of enforcement to the Isle of Man Financial Supervision increasing cost of regulatory obligation, arises right in the middle of Commission and later became Deputy Director General of the the money laundering defences area. Conducting sufficiently Jersey Financial Services Commission (JFSC), retiring in May thorough due diligence to address risks, satisfy legal obligation and 2009. regulatory review, whilst at the same time keeping disruptive or ill- timed client questions and costs to a minimum, is a serious challenge. Helen is a Fellow of the Institute of Advanced Legal Studies, a member of the Editorial Board of the Journal of Banking Financial services businesses can now outsource much of their AML Regulation and a Freeman of the Worshipful Company of customer due diligence processes and risk assessment process. International Bankers.

In on-boarding new business, specialist services can achieve what a Helen is also the founder and Chairman of KYC Worldwide good in-house compliance team would do in conducting on-going 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”

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CORPORATE SERVICES

Photo: Chris George

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 C 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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“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”

Sound corporate law principles are critical for any jurisdiction. It is not which came into force on 1 August 2014 as a result of Amendment always easy for smaller jurisdictions to demonstrate permanence or No.11, innovative provisions have been introduced which are expected track record in relation to their own legislation and it is only possible to to be of considerable interest to those considering using a Jersey do this alongside a sophisticated and robust court system. English law company in their structures. remains popular as a choice of law for corporate and finance transactions in many jurisdictions as a result of the long established Key changes to the 1991 Law as a result of Amendment principles underlying the English legislation, as well as the No.11: jurisprudence emanating from the highly regarded court system. Despite being a jurisdiction with legal origins which have been Shareholder Resolutions: New rules have been introduced which enable historically more closely connected to French law in some areas, Jersey different thresholds to be specified for different resolutions. We expect has purposefully based its corporate law regime on English company this flexibility to be of interest in many cases, including joint venture law. The Jersey courts (where the final court of appeal is the Judicial arrangements and where robust minority shareholder protections are Committee of the English Privy Council) and Jersey lawyers are required. therefore able to draw on the vast amount of English jurisprudence when posed with a difficult question. Reductions of Capital: A new procedure has been introduced which enables companies to reduce their capital without having to go to Notwithstanding the basis of the 1991 Law, Jersey has continually Court. The new procedure requires a special resolution of the sought to improve the legislation, drawing from other crown shareholders together with a supporting solvency statement by the dependencies where necessary and in the latest round of changes, directors. All types of company can take advantage of this new

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Photos: Chris George

procedure, including private and public companies. The existing expected to further facilitate the structuring of international finance procedure, which involves Court confirmation of the reduction of transactions through Jersey vehicles by putting beyond any doubt that capital, continues in force for anyone who prefers this route. for example upstream guarantees are not treated as any form of distribution. Statutory Mergers: A number of improvements have been made to the existing statutory merger rules, including shortening the timetable Ratification of Unlawful Dividends: A new statutory procedure which required to effect a statutory merger. Statutory mergers have proved enables a company to ratify a previously unlawfully made dividend or popular and we expect these changes to encourage their further use, for other distribution has been introduced. One advantage of this procedure example as one of the options for takeovers of listed companies. over existing methods is that it results in the distribution being treated as lawfully made at the time it was originally made. The procedure Statutory Demergers: A new demerger regime will be introduced which requires an application to Court with a supporting solvency statement enables an existing company to be ‘split’ into two or more surviving by the directors but does not require a shareholder vote or any creditor companies. Potential uses include effecting transfers of a portfolio of notification (unless the Court orders that creditors be notified). UK or other real estate without having to transfer that portfolio out of a remaining portfolio; splitting off certain assets in preparation for a Ratification of Breach of Directors’ Duties: A new statutory regime now sale; or creating a more robust separation of existing businesses and sits alongside (rather than replaces) the existing rules which enables risks through the creation of a revised group structure. The details of shareholders to ratify any breach of directors’ duties by ordinary the demerger procedure will be set out in separate regulations. resolution (or special resolution if the articles of association require). This is based on the English law regime but with a simplified procedure. 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 “on 1 August 2014 as a result of and offers a variety of structuring options to clients. For instance, we have advised on transactions where the overseas law did not provide for Amendment No.11, innovative provisions the compulsory acquisition of minority shareholders following a takeover offer, where the company chose to migrate to Jersey to take have been introduced which are expected advantage of our compulsory acquisition regime. to be of considerable interest to those Dividends: Amendments have been made to the dividend regime which ensure that any dividend or other distribution (including a ‘deemed considering using a Jersey company in distribution’ or ‘disguised distribution’) which does not have the effect of reducing the net assets of the company is not required to comply their structures” with the statutory rules in respect of distributions. This change is

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Purchase of Own Shares: It has been clarified that the payment for “Our new Security Interests Law, which shares can take the form of cash or non-cash consideration, which came into force at the beginning of 2014, provides more flexibility than some other jurisdictions are able to offer. has been generally very well received. The There have also been changes to the rules regarding corporate representatives and proxies which align Jersey law with English law as upgraded legislation carries several well as the abolition of rules in relation to paying commissions on newly issued shares and restrictions on issuing shares at a discount to advantages for both creditors and for the nominal value.

borrowers” 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.

Prospectuses: Changes have been made to the prospectus regime with In cross-border finance transactions, the flexible and familiar structure the result that many share offerings which currently require a of the Jersey company is critical for counterparties. This goes hand in prospectus will no longer require a prospectus under Jersey law. The hand with a state of the art security law governing the taking of security detailed exemptions will be set out in a separate Ministerial Order. over intangible moveable property such as shares and bank accounts. Our new Security Interests Law, which came into force at the beginning Takeovers: There have been changes to the minority shareholder of 2014, has been generally very well received. The upgraded legislation compulsory acquisition procedure (known as the ‘squeeze out’) on carries several advantages for both creditors (particularly in respect of takeovers, in particular in respect of the requirement to make the offer the wide powers of enforcement) and for borrowers (for example, the in jurisdictions where there are issues under the relevant law with doing simple method of creating security by agreement and registration of a so. This aligns the Jersey law with English law, although it serves as financing statement). clarification only as this was already considered to be the position under common law. As a smaller jurisdiction, our legislature can respond quickly to changing market demands to ensure that the Jersey company continues Annual General Meetings: For private companies (including existing to remain the vehicle of choice for both multinational publicly listed private companies), there is a new ‘opt in’ regime for AGMs which groups as well as private investors involved in cross-border finance replaces the existing ‘opt out’ regime. Under the new ‘opt in’ regime, the transactions. We expect that company law in Jersey will continue to default position will be that a private company does not need to hold evolve to provide a corporate law regime that remains at the cutting an AGM unless its articles of association specify otherwise. edge while still staying close to its roots in English law.

Short Notice of General Meetings: The threshold for consent to short notice of a general meeting has been reduced to 90%, except for Robin Smith meetings to consider special resolutions where the threshold remains 95%. Robin Smith is a Partner with Carey Olsen, Overseas Branch Registers: The overseas branch register rules have been Jersey. amended to permit companies to include the details of any shareholder, not just those resident in that overseas jurisdiction. This will facilitate Robin is consistently recognised for his ability listings of Jersey companies on overseas exchanges which require such to deal with a wide range of international Photo: Chris George branch registers. 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 , a Jersey Advocate and was educated at King’s College, London.

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BANKING & FINANCE

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 B 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 banking brands. This is particularly the case for wealth generators, and occasionally product matters. We work closely with the States of entrepreneurs, investors and other banking clients from the emerging Jersey, Jersey Finance and the Jersey Financial Services Commission economies of the world where a lack of local banking (JFSC) to address the various industry challenges that arise from time infrastructure/expertise or geo-political instability might be good to time. motivation for maintaining an offshore relationship in a reliable, well- established, expert and tax-neutral finance centre. The integrated nature of banking means that our members are engaged in activities that range widely across the financial spectrum including A number of Island banks are equipped and experienced in dealing retail deposit taking and lending services for the local population, with the demands of international clients from across the world and wealth management and private banking services for international offer banking products and investments in a wide range of currencies. investors and high net worth individuals, global custody, corporate and Today, accounts may be opened in Chinese Renminbi which is poised commercial banking and the provision of banking services to the other to join the US dollar and the euro as one of the world’s top three sectors of the Jersey financial services sector. global trading currencies.

As a self-governing dependency of the British Crown, the early days of The quality, longevity and depth of Jersey’s banking industry provide Jersey’s development was understandably closely connected to British a resiliency to the sector that is the envy of many competitor expatriates seeking a safe and secure location to keep their savings and jurisdictions. Jersey banks were not immune from the global reaction accumulate their wealth. to the 2008 financial crisis; the longevity of which has confounded many forecasters. The sector has weathered the crisis well although Significant advances in technology and communication now mean that many of the global banking reforms stemming directly or indirectly Jersey’s virtues have become as equally attractive to international clients from the crisis have yet to be fully deployed. 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 “Immediate challenges faced by banking reform. These include stiffer capital requirements, initiatives aimed at strengthening banking systems (e.g. ring-fencing and liquidity groups in Jersey and elsewhere arise not regulations) and tax transparency measures aimed at eliminating just from the prolonged period of low interest illegal tax evasion. In this regard, Jersey has been at the forefront of supporting initiatives rates but a variety of measures arising from to combat financial crime for many years. It has had money laundering legislation since the 1980s and introduced ‘all crimes’ international banking reform” 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.

Accompanying this refreshed Government approach is a revised Richard Ingle banking license policy from the JFSC. It has been to Jersey’s advantage that only banking institutions of the highest quality have been Richard Ingle is President of the Jersey permitted to operate from the Island. Whilst this broad philosophy Bankers Association and Chief Executive remains unchanged, the JFSC Bank Licensing Policy was adapted Officer of Standard Chartered Bank in Jersey. during 2014 in recognition of international banking reforms and offers a more flexible and welcoming approach to bank licensing. This means Richard has spent over 28 years in the that Jersey is able to accommodate a broad range of operating models financial services industry based in both the for banking groups wishing to establish a presence in one of the world’s UK and Jersey. He has been the CEO of premier international finance centres. Standard Chartered Bank in Jersey since 2010 where his role also involves providing This level of governmental and regulatory support augurs well for the area governance oversight to the Bank’s businesses in Guernsey long-term growth and development of Jersey’s banking industry. With and the . additional support and assistance from Jersey Finance, it also means that the industry is well equipped to manage the short term challenges His career prior to joining Standard Chartered included positions that it faces and will be able to benefit from the longer term growth with the wealth management arm of a UK based insurer, the asset prospects that will inevitably present themselves to a high quality, well management and private banking divisions of a leading US bank supported finance centre such as Jersey. 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

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BANKING & FINANCE

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 T 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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investment vehicles for IPOs, acquisitions, the sale of an asset and other “the focus has shifted with a far greater corporate transactions. London based lawyers and other intermediaries requirement to meet the demands of financial who place this business know they can rely on Jersey to provide the corporate banking, custodian and escrow services needed to support and institutions and corporate clients who are 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 seeking various asset holding structures to for lending to the corporate structure market and some of these require support their investment structuring and syndication with the funds booked in more than one location. Alongside the major finance centres led by London and New York, there wealth planning” 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 Yet while the volume of traditional business has reduced, this has been competes with locations such as Switzerland and Singapore but few balanced by the increase in specialist work, a range of institutional others outside of this group can match the Jersey offering. banking services that are seen to be the primary growth area for banks in the years ahead. Meanwhile, London, the pre-eminent international It is also evident that a proportion of the specialist finance work now finance centre, continues to view Jersey as a valuable partner in undertaken requires more than one jurisdiction to fulfil the needs of the managing transactions as the research undertaken by Capital Economic structure. Once again, the international banking groups which have a in 2013 was able to highlight so effectively; Jersey has been a conduit significant presence in the major IFCs hold an advantage and can help into London for £1/2 trillion of foreign investment, 5% of the entire facilitate the connectivity required by these structures. It is not stock of foreign owned assets. uncommon if a structure has been formed in one jurisdiction, the Cayman Islands, for example, that other aspects of the arrangement, Despite the downturn which affected global finance, Jersey’s banking such as any custodial services, are placed in Jersey because of the strength offering has remained relatively stable – about £140 billion on deposit – of its banking proposition. with two thirds of that total in foreign currencies. We should not underestimate the value that is associated with having As I have indicated, the evolution of the international banking sector such a preponderance of globally recognised, international banking has involved a move away from the straightforward provision of bank groups that are in place in Jersey. They are sending a strong signal of accounts and related financial services for retail customers working Jersey’s enduring appeal as a jurisdiction of choice for discerning abroad or the provision of accounts for trust companies on behalf of investors. their high net worth clients. Instead, the focus has shifted with a far greater requirement to meet the demands of financial institutions and Another necessary development has been the increasing dialogue corporate clients who are seeking various asset holding structures to between the regulator and the banking institutions. It is not only a support their investment structuring and wealth planning. question of managing the increasingly complex regulatory changes within financial services but banks are also conscious that in handling For example, Jersey has developed a track record in providing suitable 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 demands of international investors. It makes for a compelling regulator has accrued from supervising structures of this nature and the proposition for international investors and heralds a positive outlook strong working relationship it has with the leading banks, has helped to for the banking sector in Jersey. 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. Andreas Tautscher

Within the global private wealth arena, the added regulatory requirements and increasing complexity adds to the responsibility Andreas Tautscher has been Head of facing leading finance professionals and advisers instructed to manage Deutsche Asset & Wealth Management the cross border wealth of many ultra high net worth individuals. As a Financial Intermediaries division for five years result, we have been experiencing a growing amount of interest from and is also Chief Country Officer for Deutsche Bank in the Channel Islands. intermediaries, such as family office specialists, who are drawn to the international reach and regulatory experience that a global organisation He joined Deutsche Bank in 1995 and was such as Deutsche Bank can call upon from its Jersey offices. previously Chief Operating Officer Channel Islands, Cayman and Mauritius, Chief Another sector witnessing substantial growth has been alternative Financial Officer Channel Islands, Cayman and Mauritius and investments, especially the formation of structures to support private Head of Client Trust Services. Prior to Deutsche Bank he worked equity and real estate business and the administration of such funds. for PWC as Senior Auditor. He is a Chartered Accountant (ICAEW) There is plenty of evidence that overseas institutional investors, such as and has a BSc Honours degree from Kingston University London. 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. “London based lawyers and other interme- Following the success of these arrangements, the same institutional diaries who place this business know they investors are considering investments in other jurisdictions and they prefer to follow the same tried and tested path – using Jersey as their can rely on Jersey to provide the corporate holding jurisdiction of choice. banking, custodian and escrow services Jersey continues to retain its leading IFC role in international banking. needed to support and mitigate risk in such It has consolidated its partnership with London, the world’s premier capital market and maintained its high regulatory standards. Jersey’s deals, using one or more of the global banking banking industry has remained stable and solid, appreciated the need to adapt, added to its specialist skills and evolved its model to meet the providers with a presence in the Island”

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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 F 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 well- established 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.

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 them to manage their money wherever they are in the world but giving higher than the global average of 13%, show how companies are them someone to talk to about their wealth and foreign exchange looking to build their businesses in fast-growing economies. needs. There is, however, a range of factors at play in encouraging overseas This is important because expats are typically juggling a new job, a new assignments. country, a new home and possibly new schools, all with the added complexity of managing some of their finances in a different currency Many companies now see overseas transfers as a way to develop future and under a different tax system. Often they are managing properties in leaders with an international perspective on business. Employees, multiple locations – paying bills, overseeing tenants or making meanwhile, often now expect companies to offer overseas career mortgage payments. opportunities – overseas assignments have become a way to attract, retain and develop talent, according to PwC. Specialist expat services help customers plan and prepare for when they move countries and removes the complexities of managing money – The consultancy also points to another emerging trend. It says that enabling clients to grow and manage their wealth. Expats expect high- whereas in the past employers sent their employees on long speed foreign exchange services, simple international money transfers assignments, a more fluid global workplace is emerging. 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 According to PwC: “The era where assignments meant a three or four- and work in a country. year relocation followed by a return home is coming to an end. New forms of global mobility have developed in response to business While online foreign exchange operators and specialist wealth providers demands and employee preferences, many of which don’t involve are active in this space, there are clear advantages to having one point of relocation at all.” contact working within a retail bank that has a global footprint. The new generation of expats want more than traditional banking Expat customers draw comfort from having a financial institution with facilities and in response banks have developed tailor-made services. a physical presence and local knowledge of the place they have However there is no room for complacency. Digital advances are relocated to. Only a few banks boast a truly international retail banking tempting new entrants to the market, which means existing players – network. whether they are based in Jersey or elsewhere – must continue to adapt and evolve to meet the needs of an increasingly mobile expat Clients using specialist expat services such as those offered in Jersey community. have the reassurance of having a central home for their money and a consistent relationship as they travel around the world. For instance, a Dean Blackburn

Dean Blackburn is Head of HSBC Expat, “This is important because expats are responsible for HSBC Expat’s global typically juggling a new job, a new country, a business, since 2010. He has overall responsibility for expatriate new home and possibly new schools, all with customers living and working in over 200 the added complexity of managing some of countries around the world. Dean joined HSBC in 2000 and since then their finances in a different currency and has worked in Commercial and Retail Banking, and Wealth Management roles in the UK, Hong Kong and the Channel under a different tax system” Islands. Although born on the mainland he has lived in Jersey with his family since 2009.

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ACCOUNTING

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 Presidents’ Dinner L (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 order to ensure those in power understand and appreciate the interests Certified members was not supported by everyone, the proposal to of our members, our profession and the economic and social well- form a new Society was approved by a substantial majority of members being of the Island as a whole from the perspective of the accounting at a crucial Society meeting on 7 March 1974. profession.

In its early years, the Society had approximately 120 members and the One of the Society’s most significant achievements over recent years is annual membership fee was £2. the introduction of the annual JSCCA bursary which this year will see the presentation of its fifth bursary award, designed to financially assist Now over 40 years later, the Society has a membership of over 750, its Jersey students who want to enter the accountancy profession after the annual membership fee is £25 and its members represent accountants duration of their studies at University. in various industries across Jersey including finance, retail, utilities, construction and hospitality. The membership also extends to members The scheme provides a bursary of up to £5,000 per year for a Jersey of Chartered, Certified and other globally recognised accountancy school leaver attending university or further education off Island and bodies. the opportunity to obtain work experience in an accounting environment during the summer months. JSCCA in Jersey over 40 years Over its 40 year history, the Society has consistently played an With the issues of local Island employment and skills development important role in Jersey, not only in representing its members but also never being as important as they are now, the Society is delighted to by its participation in matters relating to the Island’s economic well- report that the first two bursary students have already secured training being. contracts to study for their professional exams in Jersey, following completion of their university degrees in September 2015. Some examples of how the Society has participated in matters relating to the Island’s economic well-being includes commenting on various Therefore, bursary is already beginning to achieve it principal aims of legal and fiscal consultations issued by the Jersey Financial Services not only assisting Jersey students in studying off Island but also in Commission (JFSC), Comptroller of Income Taxes or the Chief attaching local talent back to the Island to work in its accounting Minister’s Department and having regular formal and informal profession. meetings with Government Ministers, the JFSC, Jersey Finance, income tax officials, other Jersey trade associations and the Audit Regulator, in Challenges and opportunities ahead

Impact of technology During my 20 years working in the profession, the way businesses and “Technology has revolutionised the way accounting professionals operate has dramatically changed. Twenty years ago, the internet did not exist (or what did exist was used by a both small and global businesses operate 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 and as a profession we have had to weight.

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

Jersey-First for Finance | 74 layout jersey 2015 10/3/15 4:23 pm Page 75

www.pwc.com/jg

Connecting for Good Growth in Jersey

We’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. We’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 Jersey’s future good growth. To connect with us for good growth opportunities, contact us today:

Brendan McMahon Neil Howlett [email protected] [email protected] +44 (0) 1534 838234 +44 (0) 1534 838349 Alison Cambray Karl Hairon [email protected] [email protected] +44 (0) 1534 838337 +44 (0) 1534 838282

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ACCOUNTING

Impact of global regulation and tax transparency “Acronyms like AIFMD, FATCA, IGAs and One of the main outputs of the financial crisis has been the avalanche CRS are now part of everyday language of new global financial services and tax regulation which has impacted most businesses in the Channel Islands. in the average day of most accountants Acronyms like AIFMD, FATCA, IGAs and CRS are now part of working in financial services in Jersey” 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 Imagine if someone develops an App which performs nearly 100% of will need to develop methodologies in order to provide the relevant the work that a traditional management accountant is currently stakeholders assurance that the reporting being generated is fit for performing when preparing monthly management accounts. This has purpose. This is a great opportunity for agile accountants and with already happened in some parts of our profession with the function of further new global regulation expected, this opportunity should last the traditional book-keeper being replaced by new accounting systems for many years. which book-keep directly from online banking. New UK Standards (UK GAAP) This type of disruptive technology is going to continue to change the With effect from periods beginning on or after 1 January 2015, UK profession and the key challenge for accountants is to embrace this new GAAP, as users of accounts have known for the last 20 years has come technology quickly so we can remain as relevant to business as we have to an end and the principal elements of UK GAAP now consist of always been. For individuals that do not embrace this change, there is Financial Reporting Standards 100 – 104 (FRS) and the Financial high risk that the job they are doing now will be done by technology in Reporting Standards for Small Entities (FRSSE). the next two to five years. Although the aforementioned headline date is the period beginning on For accounting firms themselves, technology may create more or after 1 January 2015, under the new FRS requirements, the competitors; image a world in five years where instead of the Big-4 comparative period in a set of financial statements needs to be audit and accounting firms we have the Big-6 and the two additional presented in accordance with the new requirements, which also firms are large technology companies, such as Apple or Google, which requires the opening balances for that comparative period to be deliver all their accounting and audit services through the use of restated. Therefore, for a business with a financial year end of 31 technology. December 2014, the first year it will have to adopt the new requirements is the year ended 31 December 2015. However, it will Some accountants may laugh at the aforementioned suggestion but five need to restate the 31 December 2014 amounts in the 31 December years ago the iPad did not exist and look what they are being used for 2015 financial statements and its opening balance sheet as at 1 January now. Imagine sitting at home submitting your Jersey income tax return 2014, in order to comply with the new requirements. through an App developed by a 20 year old in Singapore and completing your conveyancing work for a new property purchase using Therefore, for businesses and accountants who have yet to consider an App developed by a 12 year old from the West Coast of America. A the impact of new UK GAAP, there is a lot of work to do over the next time period of five years may be too long – it could happen next year 12 months. 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 Andrew Quinn internet. Whether we like it or not, disruptive and enabling technologies will change the way accountants operate in the future. Andrew Quinn FCCA ACA, is President of the Jersey Society of Chartered and Certified One of the main driving forces for this change is that businesses want Accountants. the accounting profession to help them with business decisions about the future and not just compile and/or provide assurance on numbers Andrew is a Partner at KPMG in the Channel from the past. Businesses want real time financial reports and Islands with 16 years of experience in accountants with the ability to analyse huge amounts of data in order delivering audit and assurance services to a to identify trends quickly to help make business decisions about the wide range of both local and international future. financial services businesses including banks, trust companies, investment managers, fund managers and Generally, accountants by their very nature are analytical and with the various types of alternative investment funds such as property assistance of technology, leading edge accounting firms are now funds, mezzanine funds, distressed debt funds and related debt providing Big Data analytical services to businesses which analyse and repackaging structures. interpret huge populations of data with dynamic and value added results. These are the types of services local businesses are increasingly Established in 1974, the JSCCA supports the accountancy going to expect from the accounting profession in the future and those profession in Jersey and has over 750 members from across firms who invest in their technology and people to deliver these services different accountancy bodies. www.jscca.org should thrive and those who do not may struggle to survive. [email protected]

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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. T 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 £269 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 UK’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.

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MARKETS & EXCHANGES

both had a proven track record and a compelling offering, both came to “110 Jersey companies are now listed on market looking for funds to help them accelerate growth into identified exchanges around the world, from Canada new territories and both were successful at the placing price. and USA, to London, Amsterdam, Luxem- Asia Businesses in Asia have also realised the benefits of using Jersey as a bourg and Hong Kong. In terms of number, means of accessing the UK markets. Just under a fifth of Chinese companies currently listed on AIM are reportedly now incorporated in this represents a reported growth of some Jersey. Among them is GTS Chemical Holdings Plc, the largest Chinese 13% since 2013” 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, Company Laws businesses have for five years been able to access one of Asia’s largest Yet tax is far from the whole story. Jersey’s company laws also appeal to financial centres and one of the most successful exchanges using a Jersey businesses and investors alike, principally because they are familiar but incorporated company. flexible. Whilst the Jersey Companies Law bears many resemblances to the equivalent English statute and uses many of the same concepts, it Debt markets also offers a degree of flexibility not afforded by English law in certain However it is not just where a group’s ultimate holding company is key aspects, including the sources from which dividends can be paid incorporated in Jersey wherein the Island offers added value in terms of and from which shares can be repurchased. the capital markets. Multinational corporates and private equity houses in the US, Europe and Asia, in particular, have a track record of AIM successfully using Jersey-incorporated bond issuing vehicles to raise It is benefits such as these that can make a real difference, particularly funding for M&A, joint venture and other event-driven corporate to smaller businesses aiming to attract initial public investment early in finance requirements more cost-effectively than through bank lending. 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 The most common debt funding instruments issued by these Jersey exchange which is specifically designed for small to medium sized vehicles are high yield bonds and convertible bonds. Avis Budget, for enterprises. example, financed its $500 million acquisition of Zipcar in 2013 through the issue of high yield bonds, and Intu Properties plc similarly used a Two such companies in the world of online fashion that carried out Jersey subsidiary to issue its £300 million guaranteed 2.5% convertible initial public offerings on AIM in 2014 were Boohoo and MySale. In bonds which commenced trading on the London Professional Securities March, Boohoo, one of the UK’s largest online own-brand fashion Market in 2013. Convertible bonds (as well as the more typical placing retailers with a worldwide customer base, raised £300 million when it of shares or rights issues) have similarly proved popular in the context went to market. This was closely followed in June by MySale, a leading of so-called ‘cash box’ structures which use a Jersey special purpose Australian online retailer backed by Top Shop owner Sir Philip Green, vehicle to help UK-incorporated, UK-listed public limited companies to which raised £40 million. These companies had a lot in common – 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 restruct- urings, 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.

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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, H 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, This was marked in 2004 with the introduction of Jersey’s Expert with assets under management currently standing at over £21 billion. Fund Regime, which remains hugely popular today. At the heart of In addition, fund launches are well up on last year. There are now over this regime was an emphasis on helping to position Jersey strongly 1,500 regulated and unregulated funds registered in Jersey (the within the alternative investment funds market, by making the majority regulated), with the fund formation rate now at its highest authorisation of funds targeting expert investors simpler and by level since 2008. introducing a more streamlined approval process.

These strong upward trends across Jersey’s funds industry, particularly This was followed in 2008 by the launch of the unregulated ‘Eligible in the period since the AIFMD was implemented, are clearly pleasing, Investor’ and ‘Exchange Traded’ fund classifications, and pointing to Jersey’s ongoing appeal for alternative funds business. complemented further by the introduction of the lightly regulated Private Placement funds regime in 2012, specifically geared to raise Evolution funds from limited numbers of sophisticated investors. The international funds landscape in which Jersey finds itself in 2015 is, of course, very different from the retail orientated focus of the The overall result today is a full spectrum of fund solutions, from 1970s and 1980s. Back in the 70s and 80s, Jersey’s success was largely highly regulated retail funds to lighter touch options for more based on fund groups making use of redeemable share capital experienced, sophisticated, institutional investors. companies, accumulation and distribution share arrangements and early umbrella funds. Regulation Regulation continues to form a major point of discussion within the As other financial centres within the European Union began to move global funds community and a major change last year was of course into the same retail area under the UCITS directive, Jersey’s fund the implementation of the EU Alternative Investment Fund product necessarily became more diversified with a gradual shift Managers Directive (AIFMD) in July 2014. towards funds for institutional and expert investors. 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 “Regulation continues to form a major point of a range of options. discussion within the global funds community As well as allowing managers to maintain EEA-focused marketing through on-going private placement arrangements in EEA Member and a major change last year was of course States, Jersey was also the first third country to create the option of a fully-compliant AIFMD regime, in anticipation of Jersey managers the implementation of the EU Alternative gaining an EEA-wide marketing passport as and when they are made available to third countries. Also, of course, managers can also use Investment Fund Managers Directive (AIFMD) Jersey to market their funds to investors in the rest of the world through existing regimes that fall completely outside the scope of the in July 2014” AIFMD.

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The response from the fund management community to Jersey’s the industry is also working closely with Government and the regulator approach has been extremely positive – undoubtedly the trend to implement the positive recommendations of the 2013 Finance evidenced across managers based in Jersey last year was one of building Industry Strategic Jurisdictional Review. significant future management substance. The arrival in Jersey of an increasing number of major asset managers and service providers One recent legislative change, introducing a new exemption under underscores the jurisdiction’s continuing appeal to blue chip Jersey’s Financial Services Law, is expected to help bolster Jersey’s promoters. standing as a centre for hedge fund business by simplifying the regulation of regulated hedge fund management businesses established In addition, recent statistics indicate a strong take-up in Jersey’s private in Jersey who wish to undertake managed account business. placement route into Europe. A total of 186 Jersey funds and 60 Jersey Meanwhile, whilst a great deal of focus has been on Europe as a result fund managers are already actively marketing into EEA countries with of the AIFMD, it is pleasing that there has been a noticeable increase in authorisation from Jersey’s regulator under private placement regimes. the volume of non-European fund activity being channelled through the Island recently. Asian sovereign wealth funds for instance are Europe’s largest private equity fund raised in recent years enjoyed its increasingly looking at global (and particularly UK commercial) real final $10 billion closing from a Jersey management platform last year estate investment opportunities through Jersey, whilst the ‘Jersey’s Value too, whilst the second largest ever real estate fund to be listed on the to Africa’ report, published by Capital Economics last year, supports the London Stock Exchange, the Kennedy Wilson European Real Estate view that Jersey funds can play a significant role in channelling much- fund, with a capital raise of over £1 billion, was structured through needed foreign investment into infrastructure projects in Africa. Jersey. With managers remaining cautious about the full impact of global Meanwhile, the initial response of managers to the much-hyped regulation, Jersey offers a compelling solution. Its commitment to AIFMD passport has been mixed. In research by IFI Global (‘The innovation, regulatory standards, highly skilled workforce and a first Impact of AIFMD’,October 2014), for example, a significant number of class infrastructure means that Jersey can continue to give investors, managers said the AIFMD’s carrot, the passport, was of ‘little’ to ‘no fund promoters and managers the confidence they need in the long interest’ to them. Research by BNY Mellon and FTI Consulting (July term. 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 Ben Robins are far from clear, whilst Jersey’s private placement option is proving an attractive alternative. The appeal of the AIFMD brand will likely grow Ben is Chairman of the Jersey Funds but in the meantime Jersey’s flexible structuring options should allow Association. Jersey managers to test the water with different regimes according to their own needs and circumstances. A partner and head of the funds practice area at Ozannes in Jersey, Ben has Looking beyond AIFMD, managers will need to think carefully about extensive experience in investment funds, the most suitable structures for their asset management activities offshore capital markets and structured within the EEA against an increasingly complex European regulatory finance. backdrop. Jersey adheres to global best practice in securities regulation and the marketing requirements of AIFMD have inevitably brought it Having qualified as an English solicitor with Speechly Bircham in to Jersey’s doorstep but as a non-EU ‘third-country’,Jersey is ring- London, he returned to Jersey to join Mourant Ozannes (then fenced from much of the additional, emerging regulation emanating Mourant du Feu & Jeune) in 1997. He became a partner at the from Europe. firm in 2002 and has headed its Jersey and global funds practice areas since 2008. Innovative Maintaining flexibility and developing innovative products remains Ben has been a frequent participant in local industry working absolutely vital however and, with this in mind, Jersey’s broad range of groups looking at key regulatory changes, including most recently fund regimes are kept under constant review. There are plans to look at the implementation of the EU Alternative Investment Manager’s enhancing Jersey’s funds regime further in due course to make the Directive (AIFMD). He was appointed Chairman of the Jersey authorisation process more streamlined for new fund promoters, whilst Funds Association in July 2013.

“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”

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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. A 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

administrative structure to service such new business and is well “It is around this time of year that many placed to take advantage of such opportunities. businesses turn the page into a new year Jersey SWOT and look to implement their defined strategy. 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 Although SWOT analysis may be a basic tool 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 and its detailed results beyond the scope of employ.

what is a short article, nonetheless it is a We benefit from having a regulator that is staffed with former useful one to employ” 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 market itself as a gigabyte island positions us well for these emerging business is fundamental to maintaining Jersey’s reputation as a well entrepreneurial funds. operated and well regulated international jurisdiction.

We also continue to see the institutionalisation of private wealth Jersey’s entry on databanks such as the OECD/G20 ‘White List’ is structures with the creation of more sophisticated family offices testament to such an approach. A high degree of comfort can be managing wealth through investment funds vehicles. taken following the industry’s engagement with the regulator, policy makers and Jersey Finance to mitigate prejudicial effects that could Jersey’s ‘global footprint’ continues to grow and develop. The efforts have arisen as a result of international legislation such as FATCA, and willingness of Jersey Finance, the States of Jersey, local professional Dodd Frank and AIFMD. bodies as well as Jersey based organisations to explore and develop a more diverse international consumer base, continues to bear dividends Jersey is known for its strong legal and regulatory framework as well for our financial services industry. as for the quality and technical depth of its industry professionals. Over recent years, Jersey has clearly demonstrated its proactive and Accordingly we see a continuation towards diversification, not only sophisticated attitude to funds with the development of the expert limited to changes in asset classes but also from regions and countries funds (2004) the unregulated funds regime (2007), the private historically viewed as ‘no go areas’ such as Africa, Israel and India. A placement funds (2012), optional fully compliant AIFMD (2013) shift in mentality coupled with a greater understanding of these places together with multiple options for legal entity formation, including has transformed our approach from a ‘no go’ to a selective ‘proceed the various partnerships structures. with caution’,which in our view is appropriate with markets badged as ‘high risk’ by our regulator. These and other qualities provide a robust network to ensure investors are confident that their money is safe and that there is full Jersey can offer a coherent, well organised and transparent accountability.

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FUNDS

Furthermore, our strengths continue to be recognised inter- an increasing need for qualified professionals and we should take care nationally, with Jersey continuing to secure prestigious awards. to implement measures now to meet this growing need. Following on from a series of award successes in 2013, Jersey was named the best international finance centre at the International Here’s to 2015 Investment Fund and Product Awards 2014, and very recently So it is with optimism that we herald the arrival of 2015. In our success Citywealth’s ‘International Financial Centre of the Year’ in 2015, as a jurisdiction we should continue the journey wisely and proactively, which Jersey also won in 2014. ensuring we retain our competitive strengths, retain our strong customer focus, capture opportunities and manage well and quickly the Whilst variety can be good, it is not always the ‘spice of life’.It is true challenges that will come along the way. 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 Maxine Rawlins 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 Maxine Rawlins is CEO of Hawksford Group. 2013 McKinsey report into the future of Jersey as a financial centre, identified simplification of the funds regime as one area of focus. She was previously a Partner at Ernst & Young in Jersey where she led the Channel Aside from the opportunities arising from asset and jurisdiction Islands’ Tax Practice and was head of EMEA diversification, opportunities are increasingly arising in the re- Asset Management Tax. Prior to this Maxine domiciliation of established funds from competitor jurisdictions to was Chief Executive of Maples Finance, a Jersey. Last year, a $25 billion hedge fund and a €2.5 billion private financial services business headquartered in equity fund relocated to Jersey from Guernsey and Cyprus the Cayman Islands, which she drove to respectively. This is a testament to Jersey’s increased vision and achieve significant growth, including expansion into six international recognition. jurisdictions.

There will always be threats, the latest being the OECD’s Base Erosion Claire Keeney and Profit Shifting (BEPS) initiative, and it is how we deal with these challenges that ensures we stand ahead of our onshore and offshore Claire Keeney is Head of Hawksford’s funds competitors. Jersey has shown that neither complacency nor team. arrogance is a threat and recognises that failure to be proactive and proportionate, both in our funds regimes or regulation, could Claire is well-established in Jersey and abroad ultimately lead to a loss of business. as a leading offshore funds practitioner with considerable technical expertise and specialist It is rare to consider success a threat but one of the biggest practical knowledge of all types of fund administration, challenges is the ability to attract and retain experienced funds particularly international property and private professionals. As the funds industry develops and grows, we will see equity structures.

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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 T 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”

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CLEANTECH

16th and Kenya is ranked 36th as attractive countries to invest in the consumer. Solar is a popular DG option and other DG initiatives renewable energy generation. Countries willing to embrace a new such as Bloom Energy Servers can produce all year around. This can approach to energy provision can also benefit economically and socially give access to clean energy to bespoke communities through projects by attracting global investment. that are much smaller in scale, allowing the end user to participate in technology that would not have been available to them. Increasingly, An example of a government embracing cleantech opportunities and opportunities like this are fitting institutional investors’ investment the added socio-economic benefits it can bring, is the wholly-owned criteria far more readily than traditional investments. subsidiary of the Abu Dhabi government-owned Mubadala Development Company. In 2008, Masdar City broke ground and Jersey: a cleantech centre of excellence embarked on developing the world’s most sustainable eco-city. Jersey is a key location globally in the private equity and infrastructure Through smart investments, Masdar City is successfully pioneering a sectors and is equipped to support cleantech investors and help ‘greenprint’ for how cities can accommodate rapid urbanisation and sustainable investment funds manage for growth, with professional dramatically reduce energy, water and waste, in conjunction with the service providers who have specialist knowledge in all aspects of city’s research university seeking solutions in energy and sustainability. cleantech investments. Jersey also has the entrepreneurial dynamic and sophisticated technical expertise required to drive technological Investment in cleantech developments in cleantech. There is a movement amongst institutional investors to become more active in this area too, lobbying governments to take action on climate Major players have been in Jersey for some time, including Renewable change and influencing corporate behaviour. Whilst just a few years Energy Generation Ltd (listed on AIM) who develop, construct, finance ago, performance was the key driver for investment in cleantech, now and operate onshore renewables projects in the UK split across three institutional investors are aligning their investments with energy main sectors; onshore wind, bio-mass and solar. The Foresight Group, a technologies for the future. They are more aware and active around leading independent infrastructure and private equity investment embedded carbon related risks in their portfolios, even disinvesting manager, has over £1.3 billion of assets under management with one of non-renewable energy assets classes. the UK’s leading solar infrastructure investment teams and is listed on the main market of the London Stock Exchange. This trend is reflected in PwC’s Cleantech MoneyTree Report with venture investment showing strong growth in 2014, increasing 39% Driven by governmental action, in tandem with the shifting attitudes of compared to 2013 and cleantech investment for late stage opportunities institutional investors and corporates – and made possible by having increased year over year by 28% to $496 million. The solar technology developments – cleantech will gain importance as an asset industry had an outstanding year, with funding surpassing 2013 and class over the next 20 years. Jersey has all the attributes to position itself 2012. as a centre of excellence for cleantech, being a leading IFC with world class alternative funds expertise, committed to a digital economy, All of this is influencing corporate behaviour, with many cleantech- engaging with those set to lead cleantech growth (e.g. China, Europe, aware companies active in driving investment, especially in the India, GCC, UK and Africa) and supported by Jersey Finance technology sector. All of Apple’s data centres are powered by 100% initiatives. 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. Nigel le Quesne

Solar, wind and tidal energies are now more viable and have greater certainty attached to them, gaining more ‘grid parity’ alongside other Nigel le Quesne is the Group CEO & Chairman of JTC. forms of energy. Nigel has been instrumental in significantly Meanwhile, traditional barriers deterring institutional investors from growing JTC over the last 23 years. Drawing cleantech investment in the past, such as huge initial capital spend, on extensive experience gained from roles as uncertainty of returns and length of investment cycle, are being eroded diverse as personal trustee through to by technology developments. directorships of quoted companies, he provides strategic leadership and management Importance of technology for all areas of JTC’s operations, as well as developing the people In the last few years the digital sector has also recognised the he works with. importance of cleantech and the combined power of these industries are complementing each other and driving change, growth, innovation Nigel has been named as one of the top 20 trustees internationally and investment opportunities. in the Citywealth Leaders List 2013 and has been recognised as a leading ‘Trustee of the Year’ in the 2014 Citywealth Magic Circle Initiatives such as Cleanweb, address resource and sustainability Awards. challenges with connected ICT such as energy monitoring systems, helping people network around local food, green technology or online Nigel is a Fellow of the Institute of Chartered Secretaries and tools for sustainability. Distributed Generation is also moving to the Administrators and the Chartered Management Institute. He is also forefront of corporate consciousness and the needs of today’s a member of the Society of Trust Estate Practitioners, the Jersey economically and environmentally minded companies. Distributed Taxation Society, the Institute of Directors and the Jersey Funds Generation (DG) refers to power generation at point of consumption. Association. Generating power on-site, rather than centrally, eliminates the cost, complexity, interdependencies and inefficiencies associated with Nigel currently holds and has held a number of directorships transmission and distribution. Like distributed computing (i.e. the PC) across several business sectors in both private and quoted and distributed telephony (i.e. the mobile phone), DG shifts control to companies.

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PRIVATE EQUITY

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 J 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 – and suitability of – 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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private equity, Jersey carved out a role facilitating international “Even as the UK introduced REIT legislation, investment into real estate in the United Kingdom, in the absence of a the popularity of Jersey continued apace suitable indirect real estate investment vehicle under UK law. Even as the UK introduced REIT legislation, the popularity of Jersey continued and once again a depth of talent in real apace and once again a depth of talent in real estate investment administration and services has built up. The reach of this expertise has estate investment administration and since expanded, with recent Jersey investment funds and investment vehicles being established to invest in European real estate, such as in services has built up” 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 structures established in other jurisdictions with alacrity, providing a other pressures that resulted in a substantial slow down in the real European home to global private equity. In addition, other service traditional sources of debt funding, created an opportunity for those providers in the Island – including legal and accounting – are now with appropriate expertise. Even as credit markets are beginning to regularly recognised among the leading experts in the world. Recent ease, the private equity and hedge fund firms have established trends show the level of private equity investment in the corporate themselves as alternative sources of debt finance and the leading global services sector is soaring as the investors themselves recognise the value players are establishing both private and listed fund vehicles to creation opportunities in fund administration; substantial undertake principal lending activity. We expect this trend to continue consolidation can be expected in this sector. and Jersey is proving particularly popular as a location in which to establish these structures. Likewise, investor demand for access to the Development of management and advisory functions relative certainty of steady returns over the long term (matching the The years of expertise built up in the Island and the development of a long term obligations of institutional investors such as pension funds) sound regulatory framework has also recently resulted in a significant has created a rising demand for infrastructure investment. Despite a increase in the talent pool in Jersey, augmented by the arrival of further few stumbles along the way this is a substantial segment of the Jersey talented individuals and businesses. Jersey is no longer a passive home funds industry. for investment vehicles in the private equity sector but is developing as a strong centre for the location of management and advisory functions Conclusions in relation to those vehicles (and this is also being reflected in the hedge As private equity investment has grown from its origins in the US, to fund sector). become a significant economic contributor in Europe and then expanded globally, so Jersey has embraced this value creator. From Some of the leading businesses in private equity advisory services and venture capital, through buyout and into real estate, debt and hedge fund management have established offices and regulated business infrastructure, and on to hybrid investment, Jersey has built up world in the Island. The effect is not only an increase in the number and skill class expertise in servicing the needs of this industry and is increasingly set of the investment professionals on the Island but also a substantial becoming a principal base for the provision of management and increase in related professionals such as compliance managers, business financial advisory skills to the sector. The Island’s government, industry risk consultants and governance advisers. and regulatory arms are all keen to preserve and build upon Jersey’s unique, specialist position in this sector with world class standard Real estate setting, flexibility and innovation. Photo: Chris George In the latter part of the 1990s and into the noughties, in addition to 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 in- depth 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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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 J 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 be enforced by the Charity Commissioners. However there was clearly a amongst trust lawyers to be too ‘product driven’ but a look at some of need for trusts for purposes which were non-charitable, for example the changes introduced by amendment to the TJL would suggest that the holding of shares in a private trust company. The TJL was therefore the process has simply reflected the changing requirements of those amended to make provision for such trusts, but to ensure that trustees who use trusts. of such a trust will remain accountable for their actions, the statute requires that an ‘enforcer’ is appointed in respect of the trust’s non- One example is the abolition of perpetuity periods for trusts. Although charitable purposes. 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 More recently the Trusts (Jersey) Law 1984 was amended to provide a rules against excessive accumulation of income which were designed to statutory basis for what has become known as ‘the rule in Hastings- prevent property becoming inalienable and therefore falling out of Bass’.The remedy had been developed by English courts and applied by economic circulation. Following the introduction of the statute it was Jersey courts to enable the court to set aside a decision made by a found that many families wished to create structures that would benefit trustee where the trustee had failed to take into account relevant future generations beyond the 100 year limit and there was no considerations or had taken into account irrelevant ones. compelling reason under Jersey Law to outlaw this. Interestingly a number of jurisdictions have followed suit, suggesting that the Although at first sight one might think that the rule was designed to economic imperatives of earlier centuries have given way to public benefit careless trustees, the reality was that in many cases where the demand. 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 It is a basic principle of trust law that trustees are accountable to their aside the transaction the only remedy would have been for the trustees beneficiaries. In relation to the creation of trusts for purposes rather to sue the advisors, with all the cost and uncertainty of outcome that than for identifiable beneficiaries English law only permitted the litigation entails. In 2013 the English Supreme Court re-examined the creation of purpose trusts in the case of charitable trusts, which could 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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trustee’s decision making process there must also have been a breach of Given Jersey’s 30 year history as a trust jurisdiction there has been duty on the part of the trustee. 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 This formulation could lead to a situation where a decision of an finance industry and of that 25% some 27% were employed in the area incompetent trustee who fails to take advice and is therefore in breach of trust and company administration and fund management. In terms of duty is set aside, yet that of a competent trustee who takes advice, of training it is worth noting that the Jersey branch of the Society of which turns out to be wrong, is not. Jersey amended the TJL to preserve Trust and Estate Practitioners, or STEP, is one of the largest such the rule as applied by the Jersey (and English) courts prior to the branches in the world, so large that more than 1% of the Island’s Supreme Court decision, arguably for the benefit of the beneficiaries population are members. rather than the trustee. The last 30 years have seen a trust statute continually updated to meet In each of these cases the statute has been amended not to devise some the needs of prospective settlors, the development of a trust new ‘product’ but to reflect the changing needs of those who wish to jurisprudence by the Jersey courts which is frequently referred to by create trusts or, in the case of the rule in Hastings-Bass, to preserve a courts in other jurisdictions and the creation of a workforce skilled in rule that had been formulated and applied by the courts for the benefit trust administration. With those firm foundations we look forward to of beneficiaries. the next 30 years.

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 Alan Binnington to day basis. Alan Binnington is President of the Jersey Association of Trust Companies (JATCo) and “The other essential attribute is having a a Private Client Director of RBC Wealth skilled and experienced workforce. However Management’s Fiduciary Services business. Based in Jersey, he specialises in well drafted, the success of a trust in achie- establishing fiduciary structures for high net worth individuals and their families. He ving the family’s objectives will depend very studied law at Cambridge, following which he qualified as an English barrister. On his return to Jersey, he much on those who administer it on a day qualified as a Jersey Advocate in 1984 and was a Partner in the Jersey Law firm Mourant from 1985 to 2009, specialising for to day basis” many years in commercial litigation. He joined RBC in 2009. [email protected]

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WEALTH MANAGEMENT

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. S 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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WEALTH MANAGEMENT

Photo: Chris George Our people are the foundation companies and client. This also lends itself well to developing and The success of any global financial centre is not predicated upon good fostering long-term client relationships, an obvious yet exceptionally fortune or chance. Indeed the ground work for a successful financial important component for institutions to ensure superior customer centre is laid by its educated and knowledgeable labour force. Jersey is service. recognised for its deep industry knowledge in wealth management and structuring, and this is directly attributed to the talented labour force it Location, location, location attracts and maintains. 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 same cannot be said for all competitor markets, many of which the world over. In addition to being in a time zone that easily serves foster transient professional migration. Jersey’s community culture clients across geographies, it also allows for quick access to and from promotes strong work-life balance in the financial services industry. London. 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. The Island now benefits from the presence of international financial leaders in clearing banks, merchant banks and international banks from “The proximity of Jersey to London has seen geographies ranging from the UK, Europe, North America, the Middle a remarkable level of partnering with onshore East and Africa, many of whom leverage global business and practice to complement product and service offerings in Jersey. We might be a industry leaders. However, partnerships small island in size but the impact of our financial institutions is large among Jersey’s institutions are not solely and can be felt throughout many countries. While international financial leaders are making their marks in Jersey, limited to those in the UK” 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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WEALTH MANAGEMENT

“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 this has forced some financial centres to face uncomfortable realities in British Isles’ banking system, differentiates Jersey from its competitors. terms of regulation compliance. On the other hand, Jersey has faced these challenges head on, by proactively engaging with regulators and Adaptability in changing environments policy makers to ensure it is well-positioned to comply with new At first glance, many outsiders may look at Jersey as simply a tax- legislation, such as the Foreign Accounts Tax Compliance Act (FATCA) neutral domicile, allowing for non-resident investment with no capital, and other measures implemented by global authorities. Indeed, Jersey withholding or wealth taxes. While these may be some of the initial has a long history of strong AML procedures and leading actions to attractors for both financial institutions to set up shop and private and stop financial crime. Through this – and due to the global trend institutional clients to invest, resiliency and adaptability in uncertain towards greater transparency – Jersey’s financial institutions have times further strengthen Jersey’s value proposition and sets it apart adapted to ensure legitimate client confidentiality while meeting from other jurisdictions. regulatory requirements.

As we have seen in recent times, the global financial services sector has Experience is our competitive edge been on a crash course with a changing regulatory environment and 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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Structured offshore.

Voisin law firm and Volaw Group have created a strong reputation in developing and managing innovative financial structures including complex commercial transactions using Jersey entities.

You can benefit from our unique combination of legal knowledge and fiduciary expertise in the establishment and administration of trusts, companies and partnerships that may be used for a wide variety of conventional and Islamic structured finance and capital markets transactions, specialist investment structures and in the preservation and management of family wealth.

To see how our combined perspective can make all the difference, contact one of our experts today.

www.voisinlaw.com VOISIN LAW FIRM www.volaw.com Ian Strang - [email protected] or 37 Esplanade, Nigel Pearmain - [email protected] St Helier, Jersey JE1 1AW, Channel Islands. VOLAW GROUP Tel: +44 (0)1534 500300 Fax: +44 (0)1534 500350 Robert Christensen - [email protected] or [email protected] Trevor Norman - [email protected] [email protected]

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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 P 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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PHILANTHROPY

Trusts and foundations are the two key structures used for • Duration: The trust can be established for an unlimited period. philanthropy in Jersey, with the Trusts (Jersey) Law (the ‘Trusts Law’) dating from 1984, and the Foundations (Jersey) Law (the ‘Foundations • Registration: There is no public registration of trusts in the Island Law’) having been brought into force in the Island in 2009. and the establishment of a Jersey trust can therefore be attractive to those not wishing to have a public profile in relation to their In addition to these two key pieces of legislation, the Charities (Jersey) philanthropy. 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 • Enforcement: The Attorney General in the Island enforces charitable excellence for philanthropic wealth management. The Charities Law is trusts. A non-charitable purpose trust has an office holder known as being brought into force in stages and, when fully enacted, will an enforcer, to enforce its non-charitable purposes. The enforcer complement the Trusts Law and the Foundations Law by offering a cannot also be a trustee of the trust but there are no other voluntary system of registration in Jersey, for those wishing to register limitations with regard to the choice of the enforcer. An individual structures as charities. or a corporate entity can be appointed and there is no requirement for the enforcer to be resident in Jersey. Trusts The Trusts Law allows for the creation of both charitable and non- • Taxation: In relation to charitable trusts, the Income Tax (Jersey) charitable purpose trusts. It is therefore possible to establish a trust for Law 1961 (the ‘Income Tax Law’) provides an exemption from charitable purposes or, alternatively, for philanthropic purposes which income tax in respect of income derived from the property of a may not be technically charitable, such as a trust for humanitarian, trust established in Jersey for the advancement of education, the ecological or research purposes. relief of poverty, the furtherance of religion, a purpose beneficial to the whole community, or the service of any church or chapel or any With a trust established under Jersey law, the following are key points building used solely for the purpose of divine worship, in so far as to note: the income is applied to those purposes. In relation to non- charitable 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 “It is possible to establish a trust for Jersey (other than a charity) has an interest or is intended to have an charitable purposes or, alternatively, for interest, whether during or at the end of the trust period. Foundations philanthropic purposes which may not be The Foundations Law is very flexible and allows for the creation of a foundation for purposes – known as objects – which are charitable, technically charitable, such as a trust for non-charitable, or both charitable and non-charitable. From its introduction in 2009, one of the most important uses for Jersey humanitarian, ecological or research foundations has been in relation to philanthropy, with foundations being seen as an ideal vehicle for those keen to pursue particular purposes” 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: foundation’s assets) or might be the guardian (with a monitoring role, to ensure that the council administers the assets and carries out • Founder: The founder is the person upon whose instructions a its objects as required by the constitutional documents). foundation is incorporated. A founder need not endow assets upon the foundation and (unlike a trust) it can come into existence • Open profile: For some clients, it will be important that a without assets. foundation’s existence is a matter of public record and that its charter can be viewed by conducting a search of the register of • Constitutional documents: A foundation’s constitutional documents foundations. Where a structure is being established for are its charter (which is registered and open to public inspection) philanthropic purposes, it can often be appropriate to establish and and its regulations (which are not registered and are therefore maintain an open profile and relevant information can be included private). in a foundation’s charter (in addition to the mandatory provisions) to satisfy a client’s objectives in this regard. • 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.

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 • Taxation: Whilst the exemption contained in the Income Tax Law flexibility as to the choice of name for a foundation, provided that it ends which applies to charitable trusts does not apply expressly to with the word ‘Foundation’ or a foreign language equivalent. It is foundations, an exemption from Jersey income tax will nevertheless therefore possible to use a family name, or other name of personal be granted by concession to a foundation which is established solely significance, for a philanthropic foundation if that is desired or, for charitable purposes. Where a foundation is established for alternatively, to choose a name which preserves the anonymity of the philanthropic purposes which are not strictly charitable, it is client. 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 •No ultra vires: The doctrine of ultra vires (i.e. beyond the powers) does respect of which it is charged to income tax at the rate of 20%). If a not apply and a foundation can exercise all the functions of a body Jersey resident has an interest in a foundation (directly or corporate, save only that it cannot directly (a) acquire, hold or dispose of indirectly), an application should be made to the Comptroller of immovable property in Jersey or (b) engage in commercial trading that is Taxes for pre-clearance prior to incorporation (to determine not incidental to the attainment of its objects. However, both of these whether or not the statutory anti-avoidance provisions are relevant). restrictions can be overcome by interposing an underlying company, so that the relevant activity is not undertaken directly by the foundation. Charities Law As mentioned previously, the Charities Law is being brought into force • Indefinite existence: As with Jersey trusts, foundations can continue to in stages, to allow for preliminary matters to be completed first, before exist for an indefinite period or for a specified period, to suit a client’s it becomes fully effective. These preliminary matters include the chosen objectives. appointment of a Charity Commissioner, the issuance of guidance by the Commissioner and the introduction of supporting regulations and orders. “The Charities Law, when fully enacted, will During this initial stage, whilst only certain provisions are in force, the remainder of the Charities Law will effectively be dormant, so that the complement the Trusts Law and 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 Foundations Law by offering a system of Charities Law. registration in the Island, for those wishing The Charities Law, when fully enacted, will complement the Trusts Law and the Foundations Law by offering a system of registration in the to register structures as charities” 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 • any benefit gained or likely to be gained by members of the entity Jersey trust and Jersey foundations) which satisfy the new charity test itself or any other people (other than as members of the public) in the Charities Law to apply for registration. An entity meets the and disbenefit incurred or likely to be incurred by the public. charity test if: If benefit is likely to be provided to a section of the public only, the • all of its purposes (as defined) are charitable purposes or purposes Commissioner will also consider whether any condition on that are purely ancillary or incidental to any of its charitable obtaining that benefit (including any charge or fee, such as a purposes; and membership fee) is unduly restrictive.

• in giving effect to those purposes, it provides (or intends to An entity wishing to register will provide prescribed information to provide) public benefit in Jersey or elsewhere to a reasonable the Commissioner and, when registered, will be given a certificate of degree. registration, confirming its registered name and number and the date of its registration. The register will be divided into general and However, an entity will not satisfy the new charity test for the restricted sections (for current registrations) and an historic section purposes of the Charities Law if its constitution expressly permits its (for registrations which are no longer current). 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 The general rule will be that all of the information on the general foundation – to be) Jersey’s Chief Minister, a member of the States and historic sections of the register will be publicly available but that Assembly, or someone holding an equivalent position in another only limited information will be publicly available in relation to the 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 “The Charities Law contains an extensive list science and also the advancement of public participation in sport (which is not currently charitable under Jersey’s customary law). It of charitable purposes including, for example, also provides for other purposes to be treated as charitable if they can reasonably be regarded as analogous to those which are listed and advancement of the arts, heritage, culture or allows for the list of charitable purposes to be added to in due course. science and also the advancement of public There is to be no presumption that any particular charitable purpose is for the public benefit. The Commissioner must compare, as a participation in sport” consequence of the entity exercising its functions:

• 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 others, registration as a charity under the Charities Law, either on designate a specified matter – on any section of the register – as not the general or the restricted section of the register, will be preferred. being a public part of the register for that particular entity. This power will be available if the Commissioner considers that the safety or • Jersey is a tax neutral environment in which to establish structures, security of any person, property or premises would be significantly put with Jersey tax exemptions also available subject to compliance with at risk by public access to the specified matter. relevant conditions.

It is envisaged that those wishing to register as a charity will choose: It is therefore anticipated that the Island’s established position in relation to philanthropy will continue to strengthen as more clients • the general section if the intention is to raise funds from the public, choose Jersey structures to pursue their philanthropic giving. 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. Zillah Howard Taxation Registered charities will be eligible for the full range of Jersey charitable Zillah Howard is a Partner at Bedell Cristin in tax reliefs, as follows: Jersey with more than 25 years’ experience in international private client work. • exemption from income tax; She provides Jersey law advice for high and • entitlement to recover income tax on certain donations received by ultra high net worth families in relation to way of a lump sum payment or pursuant to a deed of covenant; trusts, foundations and philanthropy, and works with trust companies and leading law • entitlement to reclaim any goods and services tax (GST) paid and firms on estate planning issues. She advises exemption from the requirement to register for GST; extensively on the establishment and reorganisation of complex structures, the use of settlor reserved or granted powers, and the • entitlement to reduced rates of stamp duty and land transaction tax. use of private trust companies.

Once the Charities Law is fully enacted, it will still be possible for Zillah is an active member of working groups which help to shape charitable trusts and foundations which are not registered to qualify for trusts, foundations and charities law in Jersey. She was exemption from Jersey income tax on satisfaction of certain conditions. recognised as ‘Best in offshore’ at the Europe Women in Business In addition, tax neutrality is to be preserved for structures with no Law Awards in 2012, 2013 and 2014, and is included in Private beneficiaries in Jersey and no income deriving from land and buildings Client Practitioner’s 2013 and 2014 lists of the UK’s 50 Most in Jersey. Influential Private Client Practitioners, the ‘Honours List’ in the ‘Leading Lawyers’ category of the 2012, 2013 and 2014 Conclusion Citywealth Leaders Lists, in Citywealth’s 2013 list of the IFC With the introduction of the Charities Law to complement the Trusts Power Women Top 100 and in Citywealth’s 2014 list of the IFC Law and the Foundations Law, Jersey is well-positioned to operate as a Power Women Top 200. 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 This article is intended to provide a brief commentary in relation to the tailor a structure to pursue his or her chosen philanthropic goals, subject named. It is not intended to be comprehensive nor to provide legal whether or not those goals are technically charitable. advice and should not be acted or relied upon as so doing. Professional advice appropriate to the specific situation should always be obtained. • For those keen to have some form of public profile in relation to [email protected] their giving, there is a choice in relation to registration options. For Photo: Chris George some clients, registration as a foundation will be appropriate; for © 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 A 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 indemnities to shareholders or subsidiaries, acting as trustee or the need for robust administrators with a global capability themselves is financing of another SPC. becoming a core requirement. One of the key reasons for SPCs being so attractive is that no A key difference for GCC clients is of course the application of Sharia corporation tax will be payable on them until at least 2054, a matter Law which will ultimately have an impact on planning and related which has been guaranteed by law. Most interestingly, 100% foreign operations for the individuals involved, their families and their business ownership is permissible under the current legislation. interests. We have seen first-hand how simple Mudarabah and Istisna financing structures can be used for Sharia compliant solutions. The Family/corporate governance, generational and use of these types of structures are being utilised more and more and succession planning we do not foresee there being any reduction in the use of them. Family governance generally covers areas of estate planning, leadership transition during the generational change, recognition of family We have also seen a greater uptake in the use of Dubai International fairness and establishment of family protocols. Finance Centre (DIFC) special purpose companies (SPCs) that are incorporated under the laws of the DIFC. These may only be used for Recognition is given to the fact that dynamics of family firms is ‘Exempt Activities’ which include acquisition, holding or disposal of inextricably linked to the life cycle of families and that governance any asset, obtaining financing, granting of security, providing 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 “A key difference for GCC clients is of course requires sensitive discussion not only between siblings and different generations of family members, but often between the principal and the the application of Sharia Law which will 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 ultimately have an impact on planning and fit for purpose, either due to changes in family dynamics, within the related operations for the individuals involved, regulatory landscape, or indeed the direction of the business itself. Whilst it is still a developing area for principals to consider the use of their families and their business interests” 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 The fundamental principles of long term incentive and retention plans options, such as foundations or private trust company structures, the through the alignment of employee interests with corporate objectives Principal can continue to still retain an element of control, whilst is not a new concept and the implementation of structures to govern engaging with independent directors who sit alongside them. These these arrangements is gaining momentum in the region. This is arising individuals, which may also include other family members, can form from regulatory requirements and competitive pressures. advisory boards or a family council. These groups are put in place to ultimately improve the governance of the business. There is also a greater demand for the setting up and ongoing management of an increasingly sophisticated and diverse range of Another popular topic within the region is the foreign ownership plans, both standard and bespoke, for significant regional businesses. restrictions, allowing only GCC nationals to own certain types of local assets. It is commonly known that there are some issues Conclusion surrounding planning and structuring of GCC based assets. These The GCC region will continue to present fantastic opportunities for planning opportunities remain challenging today. That said, it is clear those professional services firms that commit to the region for the from the introduction of new vehicles, such as DIFC trusts for long term and focus on establishing well founded relationships built example, that there is an appetite to structure family assets. However, it on trust. 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 Siobhan Crick Guernsey foundations alongside the Dutch foundation. Siobhan Crick is a Director within the Private For clients with substantial wealth, setting up their own family office Client division at Sanne. is still an option and we work with a number of UHNWIs and their families to implement the correct structure for such ventures. The Siobhan has responsibility for the delivery of Single Family Office Law introduced in 2001 allows these to be trust and corporate services to an formalised within the DIFC, however families of this size and substance international client base, with a specific focus are capable of housing these arrangements within their own premises on individuals from the MENA region. and see this as an extra layer of cost which is not necessary. She has over 16 years’ experience in dealing Remuneration policies with the implementation of complex structuring arrangements for The other area which has experienced a growing interest is the sophisticated international ultra-high net worth clients and their executive incentive arena. diversified asset classes.

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Partnerships, relationships, affiliations. Whatever you call them, all companies need good connections.

^ƵƌĞ/ŶƚĞƌŶĂƟŽŶĂůŝƐƉĂƌƚŽĨƚŚĞĂƚĞůĐŽ'ƌŽƵƉ͕ĂĐŽŵŵƵŶŝĐĂƟŽŶƐĐŽŵƉĂŶLJǁŝƚŚĂŐůŽďĂůĨŽŽƚƉƌŝŶƚĂŶĚ ǀĂƐƚĞdžƉĞƌƟƐĞ͕ĚĞůŝǀĞƌŝŶŐĐŽƌƉŽƌĂƚĞƚĞůĞĐŽŵŵƵŶŝĐĂƟŽŶƐĞƌǀŝĐĞƐƌĂŶŐŝŶŐĨƌŽŵǀŽŝĐĞ͕ŵŽďŝůĞĂŶĚďƌŽĂĚďĂŶĚ ƚŽŶĞƚǁŽƌŬƐ͕ŽŶͲŝƐůĂŶĚĚĂƚĂĐĞŶƚƌĞŚŽƐƟŶŐ͕ŐůŽďĂůĐŽŶŶĞĐƟǀŝƚLJĂŶĚŵĂŶĂŐĞĚƐĞƌǀŝĐĞƐƐŽůƵƟŽŶƐ͘ KƵƌŐƌŽƵƉƐƚƌƵĐƚƵƌĞĐŽƵƉůĞĚǁŝƚŚůŽĐĂůĞdžƉĞƌŝĞŶĐĞĂŶĚŬŶŽǁͲŚŽǁ͕ ŵĂŬĞƵƐĂƉĞƌĨĞĐƚĐŽŶŶĞĐƟŽŶĨŽƌLJŽƵƌĐŽŵƉĂŶLJ͘ Contact Jon McCulloch, Head of Sales on 01534 888291 or email [email protected]

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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. T 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 , 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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ICT

that are easy to automate are increasingly digital, with more knowledge “Increasingly FinTech also includes small and based areas now coming under scrutiny; the highly important and highly creative companies and start-ups, increasingly resource intensive needs for KYC and audit are excellent examples. applying new technology in innovative and This digital-driven change in financial services must also consider the disruptive ways, as recent changes in additional ingredients of regulation and culture. insurance, mortgages, crowd-sourcing, Financial systems are complex, interconnected and global and are monitored and regulated by an equally complex system of controls. crypto-currencies and many more attest to” 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 The term ‘FinTech’ includes existing technology supporting financial services, they must work to avoid becoming a brake on developments services and is most often represented by large complex systems and a point of resistance. provided by established technology companies. Increasingly FinTech also includes small and highly creative companies and start-ups, This leads nicely in to the question of culture, more specifically the applying new technology in innovative and disruptive ways, as recent difference in culture between financial services and the digital sector. In changes in insurance, mortgages, crowd-sourcing, crypto-currencies the latter, debate tends to be open and public, often using modern and many more attest to. The well-documented drivers of eCommerce social media capabilities – discussions, successes and failures are there growth are equally material for FinTech – high levels of internet and for all to see and comment on. This form of ‘system’ development is mobile broadband connectivity, increasingly ‘smart’ mobile devices, well known through the open source programming community and is mobile payment and authentication capabilities, access to data and broadly adopted throughout the digital sector. This contrasts with the analytics and the cloud are all accelerating new services and businesses. more conservative, traditional approach used so successfully in In addition to these general ‘digital’ drivers, pressure and change within financial services. Neither is right or wrong but it will be interesting to financial services are equally compelling – there is a pressing need to see how these two cultures come together around the FinTech nexus. reduce costs, while developing new services to meet increasingly sophisticated customer demands in the world of eCommerce, The characteristics and strengths that make Jersey a leading something clearly evidenced by the recent fundamental changes in high international finance centre equally position us to excel in the area of street banking. FinTech. Jersey has an excellent financial services infrastructure, leading experts in professional services across multiple fields, is self-regulating The impact of the Internet, together with the technology and services with a flexible regulatory approach and has great access to capital. that ride on it, has led to unbelievable new value creation: many of the Supporting this, Jersey – by its nature – has excellent social largest companies today – think and Facebook – are recent connectivity, with access to key decision makers, enabling the Island to and highly innovative businesses. At the same time other industries move quickly and with agility to respond to new opportunities. have been completely restructured – think publishing and music – with many well-established players failing to compete and fading from view. Finally, Jersey is home to a growing digital community which is supporting and developing FinTech opportunities. We are currently These same changes are well underway in financial services; processes ‘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 non- executive 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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ICT: FOCUS 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 B now providing hundreds of thousands of JT SIM’s to customers across the world. One exciting area benefitting is insurance where this technology enables services such as monitoring a person’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 customers’ 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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ICT: FOCUS

“It is estimated that every year each of the However, we have created a solution – and it is relatively simple. It is provided via a system that can take alerts of potential big UK High Street banks potentially loses 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 a staggering £200 million and frequent time of day) and cross check it against a strong indicator of where ‘false-positives’ where cards are declined a person actually is. over legitimate transactions, causing How does the system know where you are? By simply identifying the geographical location of your mobile phone. inconvenience and frustration to customers” 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. In the last few years, digital technology has transformed the world By confirming the locality of a customer’s phone and identifying of retail banking. What used to be perceived as perhaps a rather important changes such as a swap of SIM or whether the conservative industry has had to react and embrace the customers’ handset has been cloned, JT is able to help verify that opportunities created by the internet and mobile technology to the card transaction being made is actually them and not made by ensure they are providing their customers with the service they a fraudster. expect, when and where they expect it. What makes this innovation unique is a careful combination of a The result for consumers has been a far more convenient and custom made platform, our 530 global roaming partners and flexible service, and it’s hard to imagine that anyone would want to importantly our size – in comparison with our UK counterparts – go back to the days of having to see a personal banker to set up a and location. Being based in the Channel Islands has enabled us simple standing order. Those changes have been good for banks to sign deals with major mobile operators such as EE and too – they have let other firms compete with the major established Vodafone to provide authorised access to mobile data, so JT can players in the retail banking sector and they have created better use their information to verify the location of a customer for a and more efficient ways of working. bank. It is a real challenge for operators to develop a service like this, especially given an alliance with competitive operators in a However they have also created challenges. 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 Today’s technology means customers have near total access to compete with them or threaten their domestic market; and we their finances at home, in the office, and on the move; be it through operate in a trusted regulatory environment with firm data their mobile, laptop or tablet device. Yet this access has also protection laws. In turn, being authorised to access mobile data of brought with it new security threats. In the UK alone eCommerce all major UK operators means we are singularly able to offer fraud was worth £110 million in the first six months of 2014 – almost universal coverage of a bank’s customer base. which was acerbated by the continuing boom in the size of the overall eCommerce market – while increasingly savvy and Now, after a two-year development project this new market Photos: Chris George sophisticated online banking fraud rose 71% over the same period. 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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ICT: FOCUS 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 sectors are long gone. O 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 To this end, we have built a Network Team that is dedicated to world-class connectivity that is backed up by highly secure tier ensuring that Island businesses have the means to operate at the three data centres which offer the perfect solutions for processing local, regional and global levels. This highly qualified and very live transactions or securely storing data. skilled team is able to design the network that your company needs whether it has to send information efficiently, securely and Sure International’s standing in the eGaming sector is second-to- effectively across continents or just across Jersey’s parish none in the Channel Islands, a fact that has been reinforced by boundaries. last year’s acquisition of the leading data centre and hosted services company, Foreshore. 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 Based in St Helier, Foreshore has been at the vanguard of data communication technologies. It is by staying at the forefront of security in Jersey. It has built a client base that reaches across the technological developments that Jersey is able to keep Atlantic and has helped it become one of the leading providers of businesses running 24/7 and able to process ever greater disaster recovery and business continuity services to dozens of amounts of information. major financial services companies in the Caribbean as well as many much closer to home. 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 “It is by staying at the forefront of enable companies to make full mobile cloud access possible across the Channel Islands. In turn, this will enable the complete technological developments that Jersey is adoption of mobile data capabilities in businesses. With firms increasingly turning to the cloud for their IT systems, services and able to keep businesses running 24/7 and storage, staff will be able to access virtually every file, no matter able to process ever greater amounts of what its type or size, on their mobile devices. There is no doubt in my mind, that Jersey is a prime location from information” 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 A 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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JERSEY’S ECONOMIC DEVELOPMENT

financial crisis, which set forward a period of careful strategic planning that allow us to stand out as an IFC; then we must learn to capture for our jurisdiction. adjacent growth with our existing products, services and markets. Finally we need to explore more ambitious opportunities in less In 2013 the consultants McKinsey conducted an independent familiar business territories by repositioning and building new jurisdictional review of Jersey. This left us confident that there continues capabilities. to be a need for IFCs, be it for: managing cross border financial flows, wealth management, efficient tax structuring, or mitigating risk from As Assistant Chief Minister with responsibilities for financial services, political instability. McKinsey also identified emerging global trends and digital, competition and innovation, there are some core principles I issues in the sector, namely: a focus on tax and transparency, wish to instil in order to protect and enhance our position as an IFC of consolidation of existing banking entities and a continued push towards substance. These principles are available in more detail in the more supranational and domestic financial regulation. Government of Jersey’s Financial Services Policy Framework.

In order to maintain our position as an IFC of substance – and substance Stability: we have a Government and a regulator which are committed is the key word – Jersey must meet the demand for IFCs in a modern to industry with an aim to sustain and further invest in long-term global economy and address the emerging trends and issues within the growth. We have a tax neutral platform with appropriate TIEAs with sector. Thankfully, McKinsey went further and provided us with four life- other jurisdictions. Jersey’s legal system is a robust, modern and mantras to follow, if only to keep us moving fast to stand still. First, we sophisticated framework and our judiciary is independent and must sustain Jersey’s core business and ensure long term prosperity of experienced with strong legal precedents in complex international Jersey’s financial services. Second, we must enhance the business enablers matters. Our Island’s fiscal management is prudent and the Island is

“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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Photo: Chris George

underpinned with good infrastructure provision such as: air-links, international finance centre. I am also committed to working closely communications and modern office provision. 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 Securing Jersey’s future initiatives. Jersey is considered a good partner to the UK and EU and as The future of our economic evolution lies in our ability to adapt, such we must create a proportionate and appropriate regulatory innovate and introduce new technology; as well as using our traditional framework in which to do business, whilst at the same time remaining strengths as an IFC to provide ‘incubator’ space for digital business. I competitive. We are also committed to international standards that are am therefore committed to realising Jersey’s potential in the ‘digital widely adopted and continue to participate in discussions and ecosystem’ and to promoting activities that improve the environment assessments with a number of international standards bodies. for digital business in Jersey.

Excellence: thanks to years of hard work, Jersey has established many One of the most natural digital environments for Jersey to focus on is world class financial services institutions, each employing highly skilled the merger of financial services with technology, known as FinTech. and experienced individuals. We are committed to ensuring we The UK FinTech market is currently worth £20 billion in annual maintain this excellence and will grow our local skill base to carry revenue, according to EY; in addition, figures from London & Partners, forward these high standards. Local expertise also extends to our pool the Mayor of London’s promotional body, show that more than half of of talented non-executive directors whose advice allows firms to all European FinTech venture capital investments made in 2014 went to diversify capabilities and continue to deliver market leading products. 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 “The future of our economic evolution lies in capabilities and acting quickly when opportunities arise. The JFSC’s recent commitment to extending the bank licensing rules to allow our ability to adapt, innovate and introduce applications from banks in the global top 1,000 – rather than just top 500 – is a clear enabler in this area. new technology; as well as using our Working together: sometimes the most effective solutions are the traditional strengths as an IFC to provide simplest. The Government, industry and regulator must align priorities and coordinate developments for the benefit of all; without, of course, ‘incubator’ space for digital business” 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

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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. earned reputation as an IFC of genuine substance. Then, as we learn I am proud of the work being carried out by the Island’s publicly how to discover our new digital industry’s offerings and realise the funded promotional body Digital Jersey, which act as an accelerator for opportunities they bring, we must be mindful to focus on business the digital economy and as an accelerator for a digitally enabled society. income, jobs and protecting our hard fought for reputation. 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 Senator Philip Ozouf international well-regarded ‘digital centre’.

However, words are not enough and we must provide measurable Senator Philip Ozouf is the Assistant Chief Minister with special responsibility for results in terms of job creation, GVA and the presence of successful financial services, technology, competition digital businesses. We must look at the provision of online services by and innovation. Government, changes to the education curriculum and improved skills and awareness in the general population. Furthermore we must look at Born in Jersey, he was educated at Victoria the development of essential ‘digital’ infrastructure such as competition College and went on to the European in digital service provision and lowering the barriers to entry. Business School in London, Frankfurt and Paris. He then worked for one of the world’s Moving on, whilst we catapult Jersey into the future, we must not forget largest multinationals on a range of projects across Europe, Africa, the driving force underpinning this development, St Helier. The Asia Pacific and the US. commercial and residential centre of Jersey will continue to be our capital city and we must forge ahead with its economic development Since 2002 he had numerous roles including: Vice Chairman of and regeneration. St Helier must continue to be a smart, vibrant and the Finance and Economics Committee, President of the dynamic place to work, live and visit, which in turn will focus Environment and Public Services Committee and Economic development away from the greener parishes and preserve the delicate Development Minister. In December 2008, he was re-elected as balance between town and country. Senator and appointed Minister for Treasury and Resources and Deputy Chief Minister. He was re-elected in 2011 as Minister for Jersey is still ‘First for Finance’,the jurisdiction has great potential for Treasury and Resources and then re-elected for a further term in Photos: Chris George the future and I am committed to ensuring we maintain our well- 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 J 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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When regard is had for what is on the horizon these are all fundamental “Jersey has a particularly close and elements for an effective response not only to the market conditions that complementary relationship with the City are expected to prevail but also to the international action being promoted by the G20 and implemented by organisations such as the of London and what is good or bad for the OECD and the EU and by individual jurisdictions. These actions represent a much more intense, comprehensive and coordinated global City of London will usually be good or bad approach to financial regulation, AML, tax transparency and information exchange. Not only is this on the horizon, the horizon also is much for Jersey” 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 A key priority for Jersey is business growth and jobs. As a community what is on the horizon. However at the same time there will be a need dependent on the export of goods and services success in achieving this not to lose sight of what have been – and can be expected to remain – objective is enhanced if export markets are buoyant. It is helpful then if the fundamentals that make Jersey attractive as an international finance on the horizon there are good signs of a solid international commitment centre. Andrew Edwards in his review of financial regulation in the to the growth of the global economy. In their Brisbane Summit Crown Dependencies undertaken on behalf of the UK Government Communique the G20 Leaders said: “Our actions to boost growth and and published in 1998, referred to six reasons why business was create quality jobs are set out in the Brisbane Action Plan and in our attracted to Jersey, reasons that are as relevant today and for the future comprehensive growth strategies. We will monitor and hold each other to as they were then – account for implementing our commitments and actual progress towards our growth ambition, informed by analysis from international • Stability: political, economic and fiscal organisations. We will ensure our growth strategies continue to deliver • Respectability: selection of business institutions of stature, and will review progress at our next meeting.” comprehensive and up-to-date legislative framework, international regulatory standards As an international finance centre Jersey is particularly focused on those • Security: secure ‘constitutional’ relationship with UK and EU, jurisdictions where wealth generation is taking place and investment confidentiality for legitimate business through customary law opportunities abound. Of great interest in this respect is the evidence • Fiscal: trusts and companies owned by non-residents may be being presented of the growth potential of African countries. The G20 exempt from Jersey income tax: commitment to ensuring that their actions contribute to inclusive and • Flexibility: speed of response to market needs, government/industry sustainable growth in low incomes and developing countries is ‘partnership’,approachability of government supportive of this. Jersey for its part, in seeing what is on the horizon, is • Quality: quality of service reflecting skills/experience of the work seeking to promote its business interests in Africa through the force, the judicial system, high standard of international negotiation of DTAs to encourage inward investment and through communication links, proximity to City of London and other offering technical assistance to help enhance their revenue raising European finance centres. capacity upon which necessary infrastructure investment also depends.

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What is also on the horizon however are clear signs of increasing Profit Shifting (BEPS), although Jersey is not as involved in the profit competition for the business opportunities being presented. When the shifting activities of multinational companies as elsewhere because of G20 say “we are promoting competition, entrepreneurship and the absence of a comprehensive range of Double Taxation Agreements innovation including by lowering barriers to new business entrants and (DTAs). 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 At the time of writing Jersey has signed 36 Tax Information Exchange for Jersey and the G20 commitment to resist protectionism is to be Agreements (TIEAs) and eight DTAs of which the majority are in force. welcome. The relatively poor growth prospects for the EU Member Jersey is currently engaged in negotiating a number of DTAs to help States tempts a protectionist response which if it is unchecked will be facilitate investment flows. Jersey is joined in the Multilateral detrimental to the Island’s best interests. Convention on Mutual Assistance in Tax Matters which provides for both information exchange on request as well as AEOI. Jersey is also Jersey has a particularly close and complementary relationship with the supportive of the international efforts to enhance the transparency of City of London and what is good or bad for the City of London will the ownership and control of legal persons and legal arrangements and usually be good or bad for Jersey. This is one of the reasons why the welcomes the steps being taken by many countries to match Jersey’s Island is keeping a keen eye on the UK’s future relationship with the internationally recognised leading position in this respect. 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. The G20 is also committed to strengthening the stability of the financial system. As an international finance centre Jersey is inevitably Another clear signal is the need of countries to increase tax revenues to caught up in the actions being taken to reduce risks in the global support essential health, education and other public services. To this financial systems. In this changing scene the past policy of only end the G20, to quote from the Brisbane Communique, has said “we licensing banks thought to be too big to fail is no longer tenable. There are taking actions to ensure the fairness of the international tax systems is a need for both Government and the regulator to respond. First, by and to secure countries revenue bases. Profits should be taxed where taking on board the regulatory developments required to strengthen economic activities deriving the profits are performed and where value the financial sector and, second, through legislation that meets the is created.” Jersey has seen these clear signals on the horizon and has taken the “As an international finance centre Jersey view that its long term future lies in supporting the international tax initiatives on transparency and information exchange. Thus in October is particularly focused on those jurisdictions 2014 Jersey joined with 51 of the then 54 countries in the ‘early adopters group’ in signing a multilateral Competent Authority where wealth generation is taking place and Agreement as a first step in the implementation of a global Common Reporting Standard on Automatic Exchange of Information (AEOI). investment opportunities abound. Of great Jersey is a vice chair of the AEOI working group of the Global Forum on Transparency and Exchange of Information for Tax Purposes which interest in this respect is the evidence being will monitor the implementation of this new standard. presented of the growth potential of African Jersey is also supportive of the work of the OECD on Base Erosion and countries”

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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 complying with international standards to protect the Island’s international standards. There can also be expected to be a growing international reputation need to meet the requirements of equivalence in compliance with the • for a partnership between Government, the regulator and the standards to ensure market access, particularly in respect of the EU. industry with shared objectives • to be competitive with a quality product and a market response What is promising for Jersey are the signs that the past discrimination which in turn calls for a positive approach to the availability of against so called tax havens per se is giving way to a focus on which manpower in sufficient number and with the required skills jurisdictions are failing to comply with the international standards that • for quick action in decision making whether it be in enacting have been set. There is some distance to go before a truly level playing necessary legislation or in providing essential infrastructure field is established and there is still the frustration faced where a jurisdiction maintains Jersey on a black list based on historic views If eyes remain fixed on the horizon and there is appropriate early notwithstanding that Jersey is a signatory to the Multilateral response there is every reason to remain confident in Jersey’s ability to Convention, is an early adopter of AEOI and has a large number of tax protect and enhance its position as a quality international finance information exchange agreements. However, the global approach being centre. There will be many business opportunities in existing and new promoted by the G20 is welcome. It should mean that Jersey will be less markets and Jersey requires only a small share of what will continue to exposed to the risk of business loss to jurisdictions who seek to be a large global market for financial services. Jersey can be expected compete through lower standards. Increasingly business success will be both to maintain its excellent track record in adapting to economic and a function of the quality of the services provided and the speed of political change, and to further reinforce its growing international response to market needs, on a foundation of common standards, and reputation as a jurisdiction supportive of G20 and other global Jersey is well placed on all counts. initiatives on financial regulation, AML and transparency and information exchange. The horizon is not without some clouds but In summary, what a study of the horizon should tell Jersey is that there nevertheless the future remains bright. is a need: • for a clear economic strategy to which all in the Island are fully Colin Powell CBE committed • for a commitment to business growth to be combined with 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 vice- chair 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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