Offshore Centres Look Back, Forward In Uncertain Times

Tom Burroughes

4 October 2021

Since the pandemic broke out at the start of 2020, it has upended how financial services operate, hastening the use of digital technology to cope with cancelled flights and enforced remote working. And one select group involved in all this turmoil is the world’s club of international financial centres.

Islands and mini-states have been havens of stability, often enjoying high vaccination rates that have won plaudits from the locals. (The UAE and Malta, to give two cases, both achieved high rates.) On the flipside, the charms of an island or Alpine village can fade if one cannot leave it for months to see family, friends and important business contacts. HNW individuals who planned on using an offshore hub as a place to stay for a few weeks in the sun must hunker down for a whole year or more.

As the crisis dragged on, many IFCs kept heads below the parapet, although from time to time news broke of how well, or not, they were ranked for business, clean money laundering records, and the like. In its annual report on global wealth, said that in 2020, rankings of “leading cross-border” centres were, in descending order of size of money: Switzerland, Hong Kong, Singapore, the US, the Channel Islands and Isle of Man, the United Arab Emirates, the UK mainland, Luxembourg, Monaco, and Liechtenstein. In 2025, BCG predicts the following ranking: Hong Kong, Switzerland, Singapore, the US, the UAE, the Channel Islands and Isle of Man, the UK mainland, Luxembourg, Monaco, and Liechtenstein. As of 2020, Switzerland had $2.4 trillion of wealth.

Pandemic or no pandemic, pressures on IFCs to behave hasn’t gone away, although it should be noted that worries about intra-government data exchange haven’t faded either, given issues such as cybersecurity attacks on government revenue departments. The tax and regulatory climate for offshore centres isn't getting easier. An overwhelming majority (97 per cent) of private wealth professionals think that governments are stepping up efforts to tax offshore wealth and plug the economic hole caused by the global pandemic. According to research by Intertrust Group published in April, more than half (56 per cent) think that this is an “extremely likely" scenario. And yesterday, the haven not given noticeably smarter responses to it than the UK or US,” professor Morriss said. “These places in the past have sold us on the line of being smart regulators….but the pandemic has made you question it for some jurisdictions.”