Transcript Jules` night out

Economic Crime, Reputation
and the Competitive Position of
the BVI
Felicity Banks
Head of Business Law
Institute of Chartered Accountants in England &
Wales
Economic Crime
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Fraud
Market manipulation
Corruption
Money laundering
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Reputation
Factors in choosing a jurisdiction:
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Geography
Infrastructure
Human resources
Legal environment
Tax environment
Reporting/disclosure obligations
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Reputation
Factors in choosing a jurisdiction:
• Geography
• Infrastructure
• Human resources
• Legal environment
• Tax environment
• Reporting/disclosure obligations
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Reputation
Reputational factors include:
• A safe and stable political, judicial and
economic climate
• Good quality of life
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Economic Crime
• Fraud
• Market manipulation
• Corruption
• Money laundering (and terrorist
financing)
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Money Laundering and Terrorist
Financing
• The process by which criminals retain,
disguise and conceal the proceeds of their
crimes
• The process by which funds are raised,
consolidated and retained for use in
financing terrorism
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Economic Crime
Predicate offences for Laundering:
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Drug trafficking
Terrorism
Corruption
Tax evasion ?
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Economic Crime
• Tax evasion ?
– Tax competition
– Tax planning
– Tax avoidance
– Tax fraud
Jurisdictional self interest?
or tax justice?
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The Economic Climate
• Pressure on tax revenues
• Need for political justification
• Increased fear of instability
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The Economic Climate
• Need for political justification
• Pressure on tax revenues
• Increased fear of instability
The first two of these will lead to
continuation of the pressure towards
tax transparency.
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The Economic Climate
• Need for political justification
• Pressure on tax revenues
• Increased fear of instability
Can even Switzerland hold out?
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Economic Crime
In addition, tax evasion can involve
unexplained, otherwise uneconomic,
transactions. Other remunerative
crime can mimic it:
– Drug trafficking
– Corruption
– Terrorism?
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Off-Shore Tools
• Stability – political, economic, fiscal, geopolitical
• Fiscal – benign, simple, tax neutral structure
• Confidentiality – protective of clients interests
• Effective regulation and supervision
• Independent judiciary
• Good travel and communication
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Reputation
• Confidentiality – protection of clients
interests
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Reputation
• Confidentiality – protection of clients
interests
How much of this is legitimate, and how
much is it intended to conceal the
proceeds of crime, including tax evasion?
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Reputation - Confidentiality
• Disclosure of beneficial ownership to
bankers and advisors in other
jurisdictions.
• Disclosure of suspect transactions or
behaviour to law enforcement.
• Disclosure of taxable amounts to
foreign tax collectors.
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Confidentiality – Suspicion Reporting
• Can a professional ethical position be
reconciled with reporting money laundering
suspicions?
• Can an open client relationship be maintained,
where there is a legal requirement to report
suspicions?
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Client Confidentiality
Experience in the UK is that client relationships
can be maintained – with care.
The tipping-off provisions do not stop
professionals from assisting clients to
regularise their position.
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The UK Implementation
In the UK, accountants in practice make
around 600 money laundering suspicious
activity report a month –
Why is this so high?
Is it a good thing?
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The UK Implementation
It is high because of:
• A wide definition of Money Laundering
• Strong enforcement
• A belief that the information generated will be
appropriately used, for the general good.
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The UK Implementation
It is a good thing if and because:
• The belief that the information generated will
be appropriately used, for the general good, is
correct.
• The danger of future inappropriate use is
remote.
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Competitiveness – The Global Financial
Centres Index
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London
New York
Singapore
Hong Kong
Zurich
Geneva
Frankfurt
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Competitiveness – The Global Financial
Centres Index
12.
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18.
22.
33.
34.
36.
37.
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Guernsey
Jersey
Isle of Man
Cayman Islands
Gibraltar
BVI
Bahamas
Monaco
Competitiveness – The Global Financial
Centres Index
According to this survey:
• The reputation of smaller and less
sophisticated jurisdictions has suffered
worse than larger jurisdictions
• Panama and the Seychelles come
nowhere.
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Reputation
High reputation off-shore centres benefit
from:
1. Professionalism, transparency and
economic value added
2. Strong legislation and regulation
3. Enforcement and prosecution
4. Engagement
Tax and confidentiality cannot be relied
upon, in a future business model.
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MAJOR PLAYERS
FATF/GAFI
Financial Action Task Force – www.fatf-gafi.org
EUROPEAN UNION
http://europa.eu.int/comm/internal_market/company/financialcrime/index_en.htm
RESEARCH
http://www.zyen.com/Activities/On-line_surveys/GFCI.htm
SOURCES OF GUIDANCE
www.icaew.co.uk/moneylaundering
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Economic Crime, Reputation
and the Competitive Position of
the BVI
Felicity Banks
Head of Business Law
Institute of Chartered Accountants in England &
Wales