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Endorsed by G20, the Isle of Man model of regulation

Veröffentlicht in Portfolio Magazine am 10/04/2009

Financial regulation and tax policy, not always known as topics likely to sell newspapers, have hit the front pages this month in an almost unprecedented manner. On 2 April 2009, amid a tumult of media coverage, protest activity and security cordons, world leaders from the G20 countries – representing 85% of the world’s output – met in London to agree a co-ordinated response to the worst international banking crisis in generations. Key among the objectives was to “reform and strengthen the global financial and economic system in order to restore confidence and trust”.

Having worked hard to establish confidence and trust over the last twenty years or more, those of us involved in the financial services industry on the Island will have taken a keen interest in the summit’s results and their implications for us. Of particular interest at both corporate and governmental levels has been the desire to strengthen financial regulation and hold individuals to account.

The joint communiqué issued by the 20 leaders present at the summit laid out a commitment to do ‘whatever is necessary’ to restore confidence, growth, and jobs; repair the financial system to restore lending; strengthen financial regulation to rebuild trust; fund and reform our international financial institutions to overcome this crisis and prevent future ones; promote global trade and investment and reject protectionism, to underpin prosperity; and build an inclusive, green, and sustainable recovery.

The communiqué made it very clear that strong, concerted financial regulation was to be a linchpin of this revival and the keyrole played by bodies such as the FSC highlighted: “Regulators and supervisors must protect consumers and investors, support market discipline, avoid adverse impacts on other countries, reduce the scope for regulatory arbitrage,support competition and dynamism, and keep pace with innovation in the marketplace.”

The commitment to take action against non-cooperative jurisdictions, including tax havens,was no less clear. “We stand ready to deploy sanctions to protect our public finances and financial systems”

It is refreshing then, to see how in tune with modern economic policy we find ourselves. Tough regulatory standards are familiar to us on the Island. The hard work of the Isle of Man’s government, their regulators and licence holders has secured a stable financial environment and economy for the Island, its residents and business associates for over twenty years. AAA ratings by both Standard & Poor’s and Moody’s, the highest ratings available, are not easily granted and give the Isle of Man an enviable reputation amongst other reputable financial centres.

The Financial Action Task Force(FATF) provides internationally recognised standards of good practice against money laundering and the financing of terrorism. The Basel Committee on Banking Supervision and the InternationalOrganisation of Securities Commission (IOSCO) have also produced international codes of best practice. The Isle of Man authorities have worked tirelessly with these organisations to help implement their international standards. Not only are they reflected in our laws but also in the rules and regulations that govern our finance industry.

In September 2008 the International Monetary Fund (IMF) were invited by the Manx Government to carry out an independent review of the Island’s financial affairs. Though the final report has not yet been issued, the draft report’s verdict on the Islands financial regulation was ‘very good’, the financial stability ‘very reassuring’and the anti-money laundering legislation was ‘above average’. These are extremely positive messages to be sending out internationally at this time.

Although our regulatory regime is already strong, the perception remains in certain quarters that the Island constitutes a tax haven of the sort demonised by the bodies mentioned above. Is this perception reasonable?

If we are to go by the definition put out by the OECD, tax havens boast low or no taxation, a lack of transparency and a refusal to provide information to foreign tax authorities. The Isle of Man is proud of its efficient tax regime but as a signatory (at time of writing) to more international tax information exchange agreements than any other nation (most recently made with France, Germany and Australia) the Island clearly does not fit the latter qualification. The Island’s inclusionon the OECD’s ‘white list’, detailing jurisdictions which have ‘substantially implemented the internationally agreed tax standard’ confirmed this assessment. None of the sanctions threatened above will therefore apply to the Isle of Man: indeed, it may yet benefit from transference of business from other jurisdictions.

This strong regulatory system and the co-operative nature of the Isle of Man’s government over its tax and banking system have left the Isle of Man very well positioned for inward long term investment. Indeed, it was this strong combination of transparency, firm regulation and compliance which made the Island such an attractive jurisdiction for the Louis family, whose business has grown in strength and stature over the last seven years.

The Louis Group are firm believers in the rigours of the compliance function, stating that “anything less than 100% compliance is not acceptable”. In my post as Compliance Manager of LGIOM, one of a number of international financially regulated businesses in the Louis Group, I take this commitment by the Louis family as the standard from which I set my goals. Alongside my counterparts in South Africa and Switzerland, my team and I are in place to protect our customers(and the public’s) interests in fighting financial crime such as identity fraud and money laundering, so often connected with the financing of terrorism, and in ensuring that our products are sold and administered fairly, transparently and in an auditable way.

I am proud, as a Compliance Manager, to be a member of a small army of guardians watching over the Island’s finance industry and the public’s interest at large. For regulators and compliance managers alike, a fine balance between over-regulating and attracting new and wholesome business must be struck. The Isle of Man has demonstrably found the right balance and we at Louis Group Isle of Man are, I believe, following this excellent example. In the workplace, along with the board of directors, I am a protector of our licence. With this comes great responsibility. The Louis family’s name and its international reputation, as well as the financial future of generations of clients and family members to come, rests with our desire and ability to be 100% compliant in all things. The public now know that this adherence to the rules is essential to the prosperity not just of companies like Louis Group Isle of Man but of the Island itself.

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