Hélène Anne Lewis was appointed as Chair of the Society of Trust and Estate Practitioners (STEP) in 2012 – the first Caribbean member to hold the position. She has wide experience in the regulation of offshore financial services, having practiced for more than 17 years in the BVI and Turks and Caicos Islands (where she often acted as Attorney General) where she is Partner in Simonette Lewis. The IFC Economic Report spoke to her about recent developments in the industry and the threat that the future may hold for IFCs.
1 - How do you think international financial centres have evolved over the decades? From haven to reputable financial centre?
The most notable changes in the International Financial Centres (IFCs) over the past few years have been in two areas – professionalism and transparency. I think professional standards have risen sharply and STEP has played an important part in that shift. Alongside that we have seen a major shift to a more transparent world. In part that reflects the rise in anti-money laundering regulations, but more recently we have seen the rapid adoption of the internationally agreed OECD global standards on tax information exchange As a result The IFCs are now offering much more than just tax advantages, although it is also important to note that the role of IFCs as ‘tax havens’ has been grossly overstated in the past. The Foot Review commissioned by the former UK Chancellor of the Exchequer in 2008, for example, found that the amount of UK tax avoided by UK corporates using British Offshore Financial Centres was “significantly lower than estimates produced by previous studies have suggested”. It is likely that is still the position today.
2 - What do you perceive to be the core strengths of the leading IFCs? What do they offer the wealth management industry?
IFCs are jurisdictions that specialise in cross-border private client wealth management by offering a mix of low or no direct taxes, professional excellence, confidentiality, and stable and modern judicial, political and regulatory environments. In the new global environment of tax information exchange, those benefits of IFCs remain attractive to investors who are increasingly looking to diversify portfolios to manage risk. While the ability to support cross-border trade and investment flows to developed economies is an acknowledged benefit of IFCs, studies have also suggested that IFCs play a positive role in enhancing economic growth and poverty alleviation in developing countries.
3 - The BVI and other Caribbean IFCs are often cited as leading offshore jurisdictions – which can be seen as both a compliment and in some cases a criticism. How can centres that provide offshore services influence their reputations in the mainstream media?
For many critics, whatever IFCs do will never be enough. Since at least the mid-90s, IFCs have been ahead of the curve in introducing regulatory measures designed to combat money-laundering and tax evasion. With the advent of the global financial crisis in 2008, governments across the world have been cutting their spending, looking for ways to increase tax revenues and also looking for someone to blame for the bad economic news. IFCs have become an increasingly easy target for criticism by politicians in high tax countries and, as a result, the media in these countries have created a narrative in which IFCs are a convenient scapegoat for the ills of the global economy. However, I believe that so long as IFCs continue to meet and exceed regulatory requirements, as many of them have already been doing, in areas such as tax information exchange and anti-money laundering, most reasonable people will at least acknowledge IFCs’ contribution to the global economy.
4 - How important is it that societies like STEP enhance the profile of IFCs?
STEP is a professional body with 18,500 members across 80 jurisdictions. We are possibly unique in that we have significant membership in both the major advanced economies and in the smaller IFCs. STEP was established on the basis of the need for continuing professional development and therefore the Society’s most important role is the promotion of consistently high professional standards by providing superior educational opportunities for our members across the globe. The TEP brand is well recognised as identifying the best available advisors in the field. The Society also advocates this message by being actively involved on the policy front, engaging with local, national and supra-national bodies on behalf of members and advising on proposed changes relevant to the estate planning profession.
5 - You are the first Caribbean chair of STEP – how important is it that Caribbean IFCs are represented on such pan global organisations?
The Caribbean Jurisdictions collectively make up around 10 per cent of STEP’s membership and are well represented on STEP’s Senior Committees including the Executive Board and Council. It is important for Caribbean IFCs to know that their practitioners have the backing of an internationally renowned and well-respected professional body which continues to have influence over the global policy agenda, and gives them access to the best possible representation in the global arena.
6 - Do you think IFCs should/could work as a collective organisation to promote and market themselves?
Over the years many IFCs have put competitive concerns to the fore rather than acting as a collective. The past couple of years have seen the realisation dawn on many IFCs that many of the concerns they hold individually are very similar to those held by other IFCs and that there could be merit in adopting a collective approach. I hope to increase such cooperation between jurisdictions in my time as Chair of STEP, particularly in the Caribbean region, by persuading our members to achieve consensus that could help influence policy in their home jurisdictions.
7 - What can IFCs do to assert their position as necessary cogs in the financial architecture?
Many studies have emphasised the positive role IFCs can play for other countries. IFCs are said to increase foreign and domestic investment in nearby countries, and boost the competitiveness of these countries’ banking sectors. It would be very difficult to proactively reverse the hostile narrative that has been created in the media against IFCs. However, the best thing IFCs can do is to continue to score well against regulatory yardsticks such as the FATF Mutual Evaluation process and prove that they continue to meet and in many cases exceed requirements in these areas.
8 - Following Cyprus’ implosion as an IFC – should other IFCs, especially in Europe, fear a similar fate?
Cyprus was hit by a very specific set of problems, but the real trigger for its difficulties was massive exposure to Greek debt. Other IFCs are not in the same position, but the Eurozone economies continue to falter collectively and many IFCs in Europe are exposed to these economies so there is little doubt that this remains a challenging economic environment for many in our industry.
9 - In the wake of the leaking of millions of bank account details in April is financial secrecy/privacy in offshore jurisdictions under threat?
It is important first to distinguish the difference between secrecy and legitimate confidentiality. Secrecy consists of hiding assets in a jurisdiction beyond the knowledge of the competent authorities in the country the money was earned in. Few will want to defend it. Privacy or legitimate confidentiality is the right for your affairs to remain private wherever you choose to hold your assets and there is a real danger that families’ legitimate rights to privacy in their financial affairs will get trampled in the rush to publish information which, at the end of the day, has been not just leaked but stolen.
A report commissioned by STEP in 2009 Offshore Evolution suggested that STEP members based in IFCs declared that ‘secrecy’ was dead as a business model but that legitimate confidentiality would remain a cornerstone of IFC business in the era of tax information exchange. I would argue that four years on developments in the IFCs world have followed those predictions closely.
10 - What impact do you think pan global regulation such as FATCA will have on the smaller financial centres?
FATCA and the development of Intergovernmental Agreements have shifted the international focus regarding international tax information exchange from exchange on request to automatic exchange. The OECD has not yet officially declared automatic exchange as the international standard but it is clear that the world is rapidly heading in that direction. As this shift occurs compliance costs will increase but as long as there is no last mover advantage and a level playing field exists among IFCs then it will be those who utilise their core competencies well that thrive going forward.
11 - Do you think the industry is in danger of over regulation or is it necessary for the continued survival of the offshore industry?
I certainly wouldn’t go as far as to say it is necessary for most IFCs to gold plate the best practice AML standards. As stated earlier, the existence of a level playing field is the key here. If all IFCs and high tax economies are subject to similar regulatory requirements then those who use their core competencies well will continue to thrive.
12 - What does the future hold for the ‘offshore’ industry? Will IFCs continue to exist / thrive in these regulatory times?
Much of the future business growth in IFCs is likely to come from new wealth in emerging economies. These new investors will be looking for the same thing investors have always looked for from IFCs namely: professional excellence, confidentiality, and stable and modern judicial, political and regulatory environments.
Hélène Anne Lewis