So, who was watching the BBC drama, McMafia? Poor Alex Godman; drawn into the murky world of international crime and (spoiler alert) ending up facilitating money laundering by accepting a subscription from an investor who was not subject to the rigours of "know your client and client due diligence" procedures. Now, as anyone working in the finance industry in Jersey will know, our KYC/CDD requirements meet the highest global standards and the Compliance Officer must be the most revered person in any office. Their word is final.
Too often the press paints the funds industry in a bad light. Panama Papers showed that David Cameron (the ex-Prime Minister, not the local celebrity chef) once held an interest in an offshore fund. Heaven forbid, his father even set up the fund. Mr Cameron then sold his interest and, wait for it, paid all the tax he owed in the UK. Story over. Even the Queen's estate has holdings in offshore funds.
Let's ask the question: why do funds domicile offshore, including in Jersey? There are many good reasons. The first essential (but not only) reason is that Jersey offers a tax neutral platform for these funds. But wait, tax neutral means that's bad, doesn't it? Not so – it is true that Jersey doesn't tax these vehicles (unless there is investment activity in the Island), but that is so we can enable cross-border investment to occur, so that institutional and professional investors can receive the maximum amount of the gains they are lawfully due from their investments. Tax will be paid, both where the investment activity takes place, and where the investors are based, according to the tax rules of those jurisdictions (unless they are exempt, as we will see below).
How does Jersey enable that and what is an institutional investor? First of all, we provide a safe and secure environment for holding valuable investments. Stability, a proportionate regulatory framework; quality governance and skilled individuals. These are all important features that were identified by a recent, independent study undertaken by Europe Economics. Secondly, institutional investors are usually tax-exempt in their home jurisdictions because they are often pension or retirement funds or sovereign wealth funds that need a balanced, diversified portfolio, to ensure a strong and reliable cash flow. In fact, this same study revealed that around 58 million people benefit from Jersey’s administration of pension funds.
Something else to be proud of; Jersey is leading the way in efforts to prevent tax avoidance. Jersey is one of the earliest adopters of an international measure designed to stop multinationals from shifting profits between countries to avoid paying tax (this is what industry calls BEPS).
We are also doing a good job. The latest figures from the Monterey Jersey Fund Report show that the funds industry is growing. Fund assets serviced in Jersey are up 14.7% on last year, totaling £246 billion.
This has a direct benefit for the Island's community. Through job creation, income taxes and social security contributions are collected. Certain local fund service providers, such as administrators and managers, pay taxes and regulatory fees too. Research by Oxford Economics has shown that for every 10 jobs in finance, nearly as many are created elsewhere in the community. When put all together, it is estimated that the presence of the finance industry in Jersey contributes more than half (57%) of all taxes raised on Island.
Over the last decade, almost 3,000 young Islanders found their first job in finance and Jersey Finance is looking to support this with a special initiative, called the Life in Finance programme, designed to help students move from school to the professional workplace, by supporting them in learning new skills and developing their existing talents.
Fund practitioners in Jersey are very positive about the future and there are many reasons we can all be proud of our finance industry. Good business, conducted by good people, for the benefit of the whole of the Island.