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By Phil Austin, Chief Executive, Jersey Finance
Limited
In four decades the Island of Jersey has become firmly established
as one of the world’s leading offshore finance jurisdictions. The
Island has relied on its political and economic stability, product
innovation, the skills of its workforce and the quality of its
regulation to support the successful development of the industry.
During this period many private clients with diverse global
financial interests, and professionals who advise individuals on
their estates and how to manage their wealth effectively, have
turned to offshore jurisdictions such as Jersey as their preferred
location for international financial planning.
But why Jersey? The largest of the Channel Islands, closer to France
than to the United Kingdom and near the English Channel, Jersey was
until recent times best known for its tourism and for its
agriculture; the face of the Jersey cow is a farming symbol
recognised the world over. Today finance is easily the largest
industry and more than 12,000 people, one quarter of the working
population, are employed by the industry.
To understand why the Island became an important financial services
centre, it is first necessary to understand something of Jersey’s
history.
Almost exactly 800 years ago in 1204, King John, on the throne of
England, ceded some of his French mainland possessions in Normandy.
The landowners in Jersey, which was a part of Normandy, chose to
remain loyal to King John and thus the Island remained a possession
of the English Crown. Since that time – and Jersey has celebrations
planned in 2004 to mark the 800th anniversary of this significant
date in its history – Jersey has been aligned first to the English
and then British monarchy. This unique constitutional relationship
has been preserved through charters and customs over the centuries.
Jersey is not represented at Westminster but has its own government
– the States of Jersey – elected from the residents of the Island.
The States Assembly looks to the United Kingdom to represent the
Island in foreign affairs, but retains total autonomy on domestic
matters, including fiscal affairs and taxation. It is this
combination of political stability and economic independence that
has enabled the Island to develop into a hugely successful financial
services centre.
The financial services sector began from a basis of private client
and trust work in the 1960s, but it was the next decade, when the
Island’s banks began introducing services for expatriates, that the
industry flourished.
It was a time in which travel was becoming easier and more
widespread and an increasing number of British citizens were
spending a period working abroad. These expatriates were attracted
to an English speaking, politically stable location where familiar
banking names were present, an appropriate location to shelter
assets in a tax efficient manner whilst overseas.
Whilst many of Jersey’s expatriate customers are still British, the
Island’s appeal has broadened over the years to attract a wide range
of international investors. Jersey is home to clients from more than
200 countries and many billions of pounds are held on deposit, much
of it in foreign currencies. The Island offers them legitimate
fiscal benefits and provides investment products which are truly
portable: that is an important consideration for career
professionals who regularly move around the world. Today, Jersey has
thriving banking, funds and trust sectors and whilst it remains a
leading centre for high net worth individuals seeking a safe, secure
home for their assets, it has diversified significantly in recent
years to appeal to world-wide corporate and institutional business.
The increased mobility of many people who live and work in different
parts of the world at various times in their lives has been an
important factor in sustaining the leading offshore finance centres.
There is more cross border movement of people, and consequentially
more cross border transactions and cross border asset holdings.
International investors that fit these categories may find fiscal
benefits from using a tax benign jurisdiction such as Jersey.
Jersey’s popularity as a finance centre has been enhanced in recent
years by its ongoing commitment to the regulatory process. Unlike
many other financial centres in competition with the Island,
Jersey’s fiduciary activities are fully regulated.
In areas such as investment services and trust business, Jersey has
frequently led the way with the introduction of measures designed to
regulate practitioners and thus help protect the interests of
investors. Clients establishing trusts or companies in the Island
are assured, as a result of legislation, that their trust or company
service provider has satisfied stringent regulatory criteria before
being granted a licence to operate. This legislation, the Financial
Services (Jersey) Law 1998, places the Island at the forefront of
legislative measures for the global trust industry. The investment
management industry is regulated in similar fashion.
The Island co-operates in the international fight against fiscal
crime and Jersey’s regulatory authorities have so far signed
agreements with 13 of the leading Western countries. These accords
make it easier to share information between regulators which helps
in the international effort to catch the perpetrators of financial
crimes. The Island has undergone several independent assessments,
all of which found Jersey’s regulatory framework to be first class.
The Island is not a part of the European Union but that has not
prevented Jersey from co-operating with financial service
initiatives that have been driven from Brussels. In the summer of
2003, Jersey, along with the other British Crown Dependencies of
Guernsey and the Isle of Man, reached agreement with the European
Union over the future direction of its taxation policy. This
agreement was an important milestone and helps to secure the
long-term future of the Island as a leading finance centre which is
able to provide a tax neutral environment for investors.
Why are all these international agreements relevant to international
investors and their advisers? We know that legitimate investors are
reassured by jurisdictions that are willing to take an active
approach to the global problem of fighting international crime and
efforts have intensified following the aftermath of September 11.
Jersey’s finance industry believes it is well placed to deliver the
financial services required by those seeking to manage their wealth
safely and effectively. It has worked hard to remain competitive and
innovative and it has embraced the need to enhance its regulatory
capabilities. This serves as a suitable platform in which to
encourage more quality financial business to its shores. |