Given increasing levels of instability and scrutiny in the world, the location of family offices has taken on new significance in recent years, with families understandably concerned about finding the most secure environment for the governance of their assets, says Dominic Wheatley, chief executive of Guernsey Finance.
Families debating whether to set up their own single family office or use the services of an existing multi family office are narrowing their search to those jurisdictions renowned for their stability and security in financial services, particularly in the face of ever-changing global legislation such as the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS), and pressure from the Organisation for Economic Co-operation and Development (OECD) on beneficial ownership and reporting.
The publication of the Panama Papers in April 2016, which subjected certain jurisdictions to unwelcome attention has only exacerbated the situation and narrowed the choice further, according to leading trust and fiduciary lawyer Russell Clark, Partner at Carey Olsen. He told me Guernsey had already been seeing a steady flow of migrations of companies and foundations into the island from certain Caribbean and other jurisdictions, but that the flow had notably increased post-Panama Papers.
“Not only did the leak raise questions regarding the level of regulatory oversight in some jurisdictions but the media furore that followed has adversely affected public perceptions of them,” says Clark.
“We are aware that some financial institutions have boycotted some jurisdictions, simply refusing to deal with structures established in them. In the new environment having effective regulators and a proven regulatory regime is seen in a far more positive light than used to be the case.”
Building on Russell’s experiences, it makes sense that those who have worked hard to build their fortune will understandably wish to protect and preserve their wealth, and not just for their immediate family but also for future generations. Properly advised structures with good corporate governance are an essential tool to helping preserve the family wealth for multiple generations.
Guernsey, as one of the very few jurisdictions in the world to regulate trust and company service providers, is one of those reputable finance centres they can choose from.
The island, which is on the OECD ‘white list’, is reported by MONEYVAL as being compliant or largely compliant with 48 out of 49 of the Financial Action Task Force recommendations on anti-money laundering and countering the financing of terrorism – the highest standard of any jurisdiction assessed.
Family offices are equally put at ease because Guernsey has its own elected parliament, a stable system of government and a mature and sophisticated legal system that, through a combination of statute and common law, provides certainty and predictability in terms of the ownership and operation of its wealth structures and investment vehicles. Guernsey’s close proximity to the City of London and mainland Europe, as well as a convenient time zone, also add to the island’s appeal.
The island’s 150 licensed fiduciaries range from multinational organisations to independent, boutique operations, all specialising in the preservation of individual and family wealth. These fiduciaries are complemented by Guernsey’s broader financial services industry as well as a strong network of professional support services, including multi-jurisdictional law firms and global accountancy practices.
Those in the Far East are among those recognising Guernsey’s reputation for strong yet practical regulatory regime. For example, at the end of 2015 Guernsey Finance, on behalf of Guernsey's financial services sector, signed a Memorandum of Understanding with the Shanghai Family Office Union. To have a partner in Shanghai with whom Guernsey can work to develop ties and increase business exchanges in the private wealth space is a positive position to be in and further evidence of our growing popularity in the family office space.
With all the pressures and challenges facing families in the modern world, Guernsey's secure and stable environment and the experience and expertise of its private wealth industry deliver real peace of mind about the governance of family assets.