The Isle of Man shirks the “tax haven' label preferring to promote itself as a reputable financial centre, writes Stephanie Apap Bologna. As opposed to rival centres, the Isle of Man promotes itself as a jurisdiction which still has plenty of room to accept more players. Stephanie Apap Bologna is a journalist at International Money Marketing.
Recently an Isle of Man contingency, made up of senior dignitaries from the island's government, business and industry, returned from an ambitious roadshow to Hong Kong. Among them was John Bourbon, the new head of supervision at the Financial Services Commission (FSC).
They travelled to the East in a bid to attract more key players from Asia to establish operations on the island, such as the recently committed asset manager Regent Pacific. Such international recognition boosts the island's profile as a reputable financial centre, regardless of competition.
Bourbon says that the main focus for the FSC is to ensure that the regulatory environment is encouraging but tough.
There are further government roadshow trips planned for this year. Officials will spread the word in Kenya, Sydney, South Africa, the US, Saudi Arabia and the United Arab Emirates.
People in the Isle of Man do not like the island to be described as a “tax haven” or an “offshore centre”. They prefer it to be known as an established international financial hub, offering good tax incentives, as well as a jurisdiction with a convincing regulatory backbone which vets without stifling. Sound legislation is at the top of the island's priority list.
Tynwald, the island's parliament, will extend the Isle of Man's anti-money laundering legislation to all crimes (it currently mainly deals with terrorist and drug trafficking money).
It is hoped that this legislation will continue to distance the island from an explosive remark made in 1997 by the head of the European Commission's Anti Fraud Unit who said: “The Channel Islands and the Isle of Man are good examples of where lax regulation combined with offshore status makes them ideal places for hiding illegal financial operations.”
“The last thing the Isle of Man needs is a scandal,” notes Andrew Baker at local firm Cains. “Scandals always get blown out of proportion, and no-one forgets them.”
It is for this reason that the FSC's Bourbon is determined the island will not accept a company in the jurisdiction unless it has a convincing track record.
Captive insurance companies and life insurance companies represent the main tranche of financial services businesses established on the island.
As opposed to rival centres such as Jersey, Guernsey and Dublin, the Isle of Man promotes itself as a jurisdiction which still has plenty of room to accept more players. It also boasts an environment where regulators understand and react quickly to industry requirements. Indeed, even cynics have sung the FSC's praises, following changes last year to quicken the process of registering restricted schemes on the island.
A chief executive committee was formed which reduced the process of registration from around three weeks to one week.
Andrew Ashworth, managing director at the largest fund management employer on the island, Global Asset Management, describes the island as having an “understated competence” that is the confidence, reliability and infrastructure to be a leading international financial services centre, but the modesty and restriction in size which limits it from shouting from the highest rooftops.
The key to a successful jurisdiction, according to Ashworth, is its commitment to business support that is available in the long term and the maintenance of a sound reputation.
During 1998, the island will see a concentration on its restricted schemes available only to professional investors, the Professional Investor Funds (PIFs). Introduced in 1996, they were amended last year. PIFs are one of the main scheme products available for licensing on the Isle of Man. Among the others are authorised funds, similar to UK unit trusts, restricted schemes and exempt restricted schemes.
According to the FSC's statistics, in September 1997 funds under management for authorised and restricted schemes was over £6bn, compared to £4.9bn the same time a year ago.
The eventual aim with PIFs is to make them attractive enough, so that the industry selects this structure rather than exempt restricted schemes.
Last November, the requirements for establishing a PIF were amended due to the unpopular requirement that only persons with net assets in excess of $2.5m could participate. This was reduced to $1m.
If the aim of replacing exempt restricted schemes with PIFs is successful, the FSC could look forward to boasting higher figures of assets under management on the island on its future roadshows.