What are the best IFCs for your client and what sort of trends are in evidence? The WealthBriefingAsia Summit in Singapore explored these issues.

International financial centres around the world face unprecedented demands for transparency and need to continue building specialist skills to retain their appeal, highlighting how there is far more to these places’ relevance than tax, a conference has heard.

With IFCs facing calls for controversial measures such as a public register of beneficial ownership, as well as having to contend with American, European and other regions’ regulatory and revenue-chasing efforts, the wealth management industry needs to keep abreast of how these centres are shaping up.

To discuss these issues, around the topic title of “The Best Jurisdiction For Your Client: An IFC Exploration”, industry figures gathered in the sumptuous surroundings of Singapore’s Raffles Hotel for the WealthBriefingAsia Summit in that city. Speakers were Agnes Chen, director of funds, corporate and trust, Singapore, for the Orangefield Group; Elise Donovan, director, BVI House Asia; Richard Grasby, head of trusts and private wealth at Maples and Calder, and Herdin Syafari, of Rawlinson Hunter. The summit was sponsored by Appway; Milltrust International; smartKYC; Vermillion; BVI Finance and Financial Planning Association of Singapore. Supporting organisations were Standard & Poor’s MMD, ProFundCom and WealthBriefingAsia.

One issue that rears its head regulatory in debates about IFCs – or offshore centres – is how government’s demands of these places is raising the question of setting a proper distinction between legitimate client privacy on the one hand, and secrecy, on the other. With demands for public registers of beneficial ownership and speedy exchange of information for tax purposes, wealthy persons in some countries will take the risk of non-disclosure because of their fears about personal safety. That was the view of Rawlinson Hunter’s Syatari, for example.

“I still see taxpayers in a critical way where they are concerned about protecting their assets in country and they still try to find an alternative way. Although a lot of Indonesian taxpayers are becoming aware and attending about the exchange of information, sometimes this can outweigh the tax risk,” Syatari said.

Asked about countries such as China adopting a worldwide system of tax similar to that in the US, he said: “Probably a common reporting or standard procedure of exchange of information or tax treaty change is doable but I’m not sure how wide any worldwide system will go or whether it will happen as each country has its sovereign priority.”

The BVI’s Donovan spoke about her jurisdiction’s experience in staying competitive in the IFC space and in remaining relevant with a wide range of specialist skills.

The BVI, she said, has the benefit of BVI-qualified professionals working around the world, particularly in Asia where it has done business for more than 25 years. There is a robust network of experienced, trusted advisors providing a sophisticated array of corporate services, in addition to wealth management solutions in trusts and estate planning, funds and investment business. “These come from the world’s leading corporate firms, trust companies, law firms that specialise in international business and cross-border transactions, and the `Big Four’ accountancy firms,” she said.

She was asked if IFCs should co-operate more, or even if there is a likelihood of “mergers” in such jurisdictions so they could be more robust. There has always been collaboration among jurisdictions, she said, giving the case of how IFC representatives meet annually to see how they can work together and to address challenging the industry. “We have seen a lot of collaboration on the regulatory side,” she said. Examples included the Caribbean Financial Action Task Force, which is the regional body of Financial Action Task Force, or FATF. (The FATF is an inter-governmental body that aims to combat crimes such as money laundering.)

As far as any consolidation in the IFC sector was concerned, Donovan said: “We are more likely to see collaboration/consolidation in the industry where we see practitioners and firms coming together rather than IFCs consolidating.”

A continuing theme, Donovan said, is of how jurisdictions can develop specialist skills and services to differentiate themselves. The BVI has hired a global consultancy firm to carry out a comprehensive review of its financial services industry and develop a strategy and implementation plan designed to chart a new direction for its financial services sector.

Changing the way that IFCs are seen is a big part of the challenge.

“There is a perception that people go offshore just for tax but the [Offshore 20/20] report shows a decline in that reason….it is about asset protection, wealth management and services,” she said. Some 51 countries, she said, have signed up to OECD Common Reporting Standards – the global “FATCA” – and 80-plus countries have said they will sign up to this initiative for automatic exchange of information, Donovan added.

Orangefield Group’s Chen was also asked about IFC co-operation as a way to remain in business.

IFCs already work together to some extent to guard their common interests, Chen said. “You would see them [co-operate] through the increasing bilateral information exchange agreements  and double tax treaties between IFCs. [There is a] strong opportunity to share best practices and build on existing connections between countries through co-operation also made practices such as compliance clearances more streamlined towards FATF standards,” she continued.

Chen also spoke about developments in trust laws in jurisdictions such as British Virgin Islands' Trustee (Amendment) Act, 2015 , as well as the Monetary Authority of Singapore's recent guidelines on strengthening outsourcing policies inevitably changed trust management practices going forward.

Maples and Calder’s Grasby spoke on what makes an IFC successful over the long term; he said a global footprint for an IFC and its associated firms is an important differentiator. “That is why our offices are in Hong Kong, Singapore and in other key centres around the world,” he said.

Asked if people need to go to an IFC to do business, he said: “It may be necessary to go there from time to time but it is not a requirement of the BVI or the Cayman Islands….With a BVI or Cayman Islands trusts structure, the first point of contact for an Asia-based client will be here [Asia].”

“In terms of asset holding, both BVI and the Cayman Islands are pragmatic enough to know that they are a primarily the  place of incorporation of the company and the underlying assets and businesses are (in the main ) elsewhere,°Grasby continued.

Regulatory collaboration is important, he said, echoing the views of other panellists. “The IFCs are working together to counter the idea of public registers of beneficial ownership and control…. You certainly see that from the pure offshore centres,” he said.

Grasby set out what he says are the continuing strengths of IFCs in the current world: “Today’s high net worth individuals are more international than they used to be…A tax-neutral platform is exactly what they want….“When using a traditional IFC, you are making use of the English based legal and court systems without tax complexities….there is the rule of law and the certainties of asset protection.”

Questioned about issues such as publication of beneficial ownership, and transparency, Grasby said there is a need to distinguish between proper regulation and scrutiny, on the one hand, and people having the ability to pry into their neighbours’ affairs, on the other. “Information should be available to the appropriate authorities for the appropriate purposes – not to anyone and everyone.”