This week saw some pretty positive news for Jersey, with ECOFIN formally recognising that Jersey had done a good job in implementing new ‘economic substance’ rules that would show clearly and unequivocally that Jersey is a cooperative jurisdiction of genuine substance.
It was a welcome result, underlining that Jersey is absolutely committed both to clamping down on illicit financial activity and to adding real value to the European economy.
And it’s been shown that Jersey does exactly that – each year Jersey facilitates around €200bn of high quality inward investment into the EU to support infrastructure development, construction projects and businesses, supporting almost 90,000 jobs in Member States, and we want to continue to build on that.
So it was frustrating that in the week preceding this announcement, there was a fair amount of politically-driven debate from certain quarters in the UK that sought to conflate and confuse issues relating to international finance centres and the role Jersey plays specifically.
Firstly, an amendment to the UK Financial Services Bill, compelling the Crown Dependencies to operate public registers of beneficial ownership, was hastily added before being almost as quickly deferred, and was accompanied by misconstrued allegations that financial flows through the islands facilitate money laundering via secret companies.
All this is certainly frustrating for us as a jurisdiction, because we know that we actually have a very good story to tell – but it underlined just how vital it is that we continue to demonstrate to key stakeholders that what we do is positive and explain why we are successful at it.
It continues to by my firm belief that judgments should be based on facts, so in light of the recent rhetoric, it’s important to provide some clarity in a number of key areas.
- First, the work undertaken in Jersey is not secret – in fact, firms here are regulated to a much more rigorous extent than in many other countries, while Jersey scores higher than most countries when benchmarked against global standards – Jersey achieved one of the highest scores globally when evaluated by MONEYVAL and is one of just 14 countries worldwide to be deemed fully compliant by the OECD in terms of tax compliance after two peer reviews. The UK, by comparison, is ‘largely compliant’.
Service providers in Jersey are required by law to know who the beneficial owners of companies are, and that information is held on Jersey’s corporate register and shared on request with the UK through a special agreement and with around 100 countries around the world through the OECD’s Common Reporting Standard. There’s not a piece of work done in Jersey that can’t be known about by the relevant authorities around the world. That’s not secret in my book.
- Further, public registers, as we’ve set out extensively previously, are not the panacea as it has been suggested in recent weeks. Neither are they a proven international standard.
Claims that the UK is a global leader in transparency because it has a public register are not clear cut. Its register is not populated by verified information, for example, so, while information on it is freely available if it’s not accurate, it’s not particularly useful. In fact, having what, by our standards, is unsubstantiated data in the public domain could hamper official investigations or even enable further criminal activity such as extortion, kidnapping and identity theft.
- One particularly worrying point made by the MPs behind the public registers amendment, Dame Margaret Hodge and Andrew Mitchell, was that the Panama and Paradise Papers are concrete proof that Jersey’s system doesn’t work and that it is facilitating illicit flows.
This is a misleading narrative that needs to be robustly challenged – not only was the data in both instances historic, dating back decades in some cases and before current systems were in place, but in any case, only a small proportion of the hundreds of thousands of intermediaries, officers and entities mentioned in both leaks had a Jersey connection (Jersey was the subject of less than 1% of Paradise Papers-related social media traffic, for instance) – and there have been no reports of any wrongdoing in Jersey at all arising from either leak.
Neither is there any official data outside of these data leaks that show Jersey is facilitating money laundering or financial crime. So, it seems odd that MPs are quite so quick to point the finger at Jersey when there is no evidence to suggest anything nefarious is happening here, and when the standards in place here are internationally recognised as better than they are in the UK.
For its part, Jersey is keen to play a positive role in the global economy, and, while it’s frustrating that some will still pander to stereotypes and choose to put forward a view that is not substantiated by fact, we will continue to work with other parties to correct misunderstandings.
The reality is that the efforts Jersey has put into setting itself up as a premium IFC – being endorsed by the OECD, MONEYVAL, the FATF and now the EU too – position it perfectly to act as a quality filter when it comes to managing global flows into and out of the UK.
Jersey adds real value to the UK economy, facilitating some £0.5 trillion of good quality foreign investment into the UK each year – investment that goes into building infrastructure, schools, hospitals, and office developments that everyone benefits from – adding £14 billion to the UK economy and supporting some 250,000 jobs.
Particularly at a time when the UK is looking to forge a new identity as a global player outside of the EU, all the evidence points to the fact that Jersey actually has a vital and symbiotic role to play in supporting the UK’s international ambitions.
Now is not the time for throwing around skewed rhetoric – doing so will be detrimental to everyone. Instead, let’s work together to navigate the future based on evidence.