A short video presented toward the end of the seventh annual Mourant Ozannes International Trusts & Private Client Conference summed up the challenges offshore financial centres like the Cayman Islands face when it comes to perception.
The video showed clips of various past television shows and films, ranging from film dramas “The Firm” and “Runaway Jury” to comedies like “Mall Cop” and “Family Guy.” What all the clips had in common is that the mention of the Cayman Islands cast the jurisdiction in a negative light, often as a tax haven where people can launder money or conduct other kinds of criminal activity. The attendees of the conference held at Kimpton Seafire Resort + Spa on Oct. 6 laughed at some of the clips because they knew very well that what was being depicted was Hollywood fiction that bore no resemblance to how Cayman’s financial services industry actually works.
“There’s a perception in populist headlines and in movies and the like that is not accurate,” said conference chair Jim Edmondson, Mourant’s head of international trusts & private client.
The conference, which had the theme “Seeking certainty in uncertain times,” also included breakout sessions and presentations dealing with specific issues affecting the international trusts and private client industry. However, the dichotomy of reality versus perception and the general lack of understanding of what offshore financial centres do and why they do it was a focus that speakers kept returning to during the one-day conference.
DEBATING THE ISSUE
In order to offer a balanced view of the reality-versus-perception discussion, one of the early sessions in the conference was staged as a debate in which a panel of four industry experts where asked to argue both sides of the statement, “The global attack on the offshore jurisdiction has gone far enough.” Although none of the panellists believed the statement to be true, London attorney Richard Wilson QC and Jonathan Speck, the managing partner of Mourant Ozannes’s Jersey office, argued the “for” position, while London attorney Charlie Sosna and Cayman Finance CEO Jude Scott argued against the validity of the statement.
Sosna noted that trusts, for example, are often used by wealthy clients in high-crime jurisdictions as a means of asset protection. By keeping the level of their wealth private, high net-worth individuals are able to reduce the risk of becomming targets of criminal activity. Sosna told the story about a Brazilian client who came to him to set up a trust. When he asked the client why he was making the move, the client said it was because of a concern for the safety of himself and his family. “He said, ‘The third time I had a gun put to my head, I made the decision.’”
In attempting to argue that the attacks on offshore financial centres haven’t gone far enough, Wilson cited some of the statistics claimed by anti-tax-haven media outlets, like that 26 per cent of the world’s wealth is supposedly held in offshore tax havens, and that 5.6 million people in the world have allegedly died because of tax avoidance between the years 2000 and 2015.
“The solution is greater exchange of information, closing loopholes and beneficial ownership registers,” he said. “We must get to a position of greater transparency. The attack must go on because if it doesn’t, nothing will change.” Speck was more tongue-in-cheek in his argument that the attacks haven’t gone far enough. He cited numerous tax evasion scandals involving politicians, former politicians or family members of politicians that have made the news.
“It’s a catalogue of infamy,” he said. “It’s what the public believe. Perception is reality. What are you going to do about it?”
Sosna admitted that many of the policy objectives of the attacks on offshore financial centres had valid reasons — like preventing terrorism funding and money laundering — but he said there was a lack of proportionality in the regulatory efforts to address those issues. Scott said legitimate, law-abiding jurisdictions like the Cayman Islands stood behind sensible efforts to stop criminal financial activity, but there needed to be “appropriate privacy” for those using offshore jurisdictions for legitimate reasons.
Later in the afternoon during the second part of the debate, moderator Robert Shepherd, the senior partner of Mourant’s Guernsey office, allowed Speck and Wilson to speak their mind without having to argue points with which they really didn’t agree. He also invited the audience to add to the discussion.
Wilson noted that the perception of offshore centres can become the reality in the eyes of the media and public.
“The distinction between privacy and confidentiality isn’t something they recognise,” he said, offering a reference to the infamous leaked documents that have become known as The Panama Papers. “If you asked someone on the street in London if everyone should know how much [former UK Prime Minister] David Cameron has in the bank and they’ll say, ‘yes, of course.’ But if you ask them, ‘Should everyone know how much you have in the bank?’ they’ll say, ‘no, of course not.’”
Sosna said the attacks on offshore centres were not well thought-out and that many of them were politically driven. What was needed, he suggested, was a better understanding of what offshore jurisdictions are all about. He noted, however, that the media tends to focus on the bad news coming out of offshore centres.
“No news is good news, but when there’s no news, it’s hard to get the good news out there,” he said. Wilson said offshore centres provided services that people need.
“The problem is we’re dealing with ignorance and an environment of suspicion. The people aren’t particularly keen on being educated on these things.”
Avoiding bad news stories by conducting business legally is one thing offshore financial centres can do, Speck said, noting that scandals are just “grist for the mill” for those who oppose them.
Commenting from the audience, London attorney Emily Exton, who presented during one of the breakout sessions earlier in the day, summarised the challenge.
“My perception is that Cayman has done a lot of work to make it a safe and reliable jurisdiction,” she said. “It’s doing the right things and you just have to try and get the good news out there. But the problem is a lot of people really hate rich people and it’s hard to tell a good-news story about that.”