Transparency & Confidential Relationships

International financial centres have always been a target of negative media. “Offshore” has become a pejorative term. Concerns regarding the regulatory and legal systems of “offshore” jurisdictions are repeatedly raised in the press and by politicians.  The so called “Paradise Papers” data leak has reinvigorated criticism.  Such criticism is in large part misplaced where Jersey is concerned. Properly informed international observers are fully aware that Jersey is a well-regulated jurisdiction with a rigorous legal system.  Its approach to the issue of beneficial ownership information transparency and the exchange of tax information has been applauded on the international stage by the OECD and MONEYVAL.  The operation of Jersey’s Company Registry; and the effective regulation of Corporate Service Providers is a model of good practice.  Jersey’s system in this regard is being promoted by experts in the field as such. The Jersey Financial Services Commission is widely recognised as an effective active regulator.  It has done much to enhance Jersey’s international standing.

So is the answer to growing international pressure for transparency in the fight against financial crime to make public, information which would traditionally be considered confidential?  Should information concerning bank accounts; tax returns; trustees and beneficiaries and company UBOs be made public?  The answer should be a firm no.  Just because tax information is publicly available in Norway does not mean it should be public everywhere.  A much more nuanced approach is called for with proper and substantial regard being given to a person’s rights to privacy.

The duty of confidentiality is an important one.  Just because criminals misuse financial and corporate services does not mean that every innocent person’s affairs should be made public.   In this regard Jersey’s courts will have an important role to play in striking the balance.  The court will need to ensure that where someone has suffered a wrong be that criminal or civil then information must be made available to the victim both as to the wrongdoing and where assets are held.  Jersey’s court is presently good at ensuring such information is made available.  It is also good at making freezing orders in appropriate cases where there is a risk of dissipation of assets.

To ensure its long term success Jersey needs to properly consider where the line lies between transparency and the duty of confidence.  It should not simply follow the trend of the day. Jersey’s Company Registry is a much better model than that adopted by the UK which insists on disclosure of the beneficial owner but has no mechanism for checking it.  The financial regulator must remain active.  The criminal law enforcement authorities must be active.  They must maintain their good record for cooperation on matters of international crime. The States must also look to the ongoing modernisation of legislation where there are gaps.  The rules of court procedure must continue to be updated to suit the modern era.

Criticism of international finance centres will continue. Led by the OECD’s Financial Action Task Force, the international community is calling for proper records to be available of the ultimate beneficial owner of corporations.  Jersey fulfils that international standard in a model Company Registry.  There will be pressure for there to be transparency regarding trusts. Some will suggest there should be information made public.  That approach should be resisted.  Properly informed persons within the international financial regulatory community understand the need for wealth structures and investment structures to remain private save where there had been either criminal or civil wrongdoing.

The JFSC works hard and is largely successful in ensuring that the highest regulatory standards are met. That will serve Jersey well. Prosecution of serious financial crime must also be a high priority. This approach is how Jersey will distinguish itself from other international finance centres which do not take their regulatory responsibilities as seriously as Jersey does.