Finding our lane: How our success in financial services means learning from other countries

Invest TCI is facilitating the development of the Financial services sector to build a diversified economy and ensure employment opportunities for the next generation. It is crucial Turks and Caicos Islanders understand and embrace this emerging landscape and begin to take steps to ensure their inclusion. The first step is access to information and having a better understanding of the sector. Invest TCI will be publishing a series of ten articles on the potential for financial services in the TCI. As we embark on this ambitious program to develop the Financial Services industry and in turn the country, Turks & Caicos Islanders need to be able to access these opportunities.

“The difficulty lies not so much in developing new ideas as in escaping from old ones.” An introspective quote from the renowned economist John Maynard Keynes appropriately sets the precedent for this week’s article. It is no secret that over the last few years many well-known international financial centres (IFC) have been working to improve their public image or what some refer to as “damage control” following a series of leaks. As a jurisdiction with an ambitious vision to be a reputable and responsible IFC, we must assess the commonalities that these IFCs have been exposed to which led to this adverse outcome and ensure that we build our framework to eliminate any potential pitfalls.

In the TCI, due to our relatively tiny FS sector we have avoided the negative connotations, reports or press as it pertains to IFCs in the past. However, as factual or exaggerated as these claims have been, leading IFCs have unfortunately contributed to this stereotype. Whether it was the Panama Papers or the Netflix film The Laundromat, recent media exposure has shined a light globally on the questionable practices undertaken by some that were based in several IFCs.

As Keynes stated, it is escaping from the old ideas where the difficulty lies, however more importantly it is escaping these old ideas where our future success as an IFC will come from. We must diligently work to build a sector that will combat any misguided notions that have been created as a result of mistakes made in the past in other jurisdictions. The old qualities of being secretive or turning a blind eye to wrongdoing must not be associated with TCI’s FS sector.

Instead, at its core, two unwavering qualities will shape the long-term strategic objectives for our sector: responsible and accountable.

Assessing the playing field

Some IFC’s in the past, to grow their sector and optimize revenue turned a blind eye in their approach to business being conducted in their jurisdiction. Indeed, some larger IFCs have, rightly or wrongly, been identified in mass personal data leaks as having facilitated corruption. We must learn from the challenges experienced by other IFCs so we do not make the same mistakes. We must put in place measures to prevent any likelihood of this behaviour taking place. More importantly, by doing this, and by being seen to be truly committed to a new way of being an IFC, responsibility and accountability will come to be associated with our reputation as an IFC going forward.

At Invest TCI, this is of the utmost importance as we seek to grow the sector. This is reinforced as a result of the timing in which we are developing our FS sector. Now more than ever, IFCs are obligated to adhere to international laws and standards or risk reputational damage. This ranges from proof of economic substance to fulfilling conditions outlined by the Financial Action Task Force. (where, based on the latter’s 2019 report, TCI fared relatively well for our capability.) The OECD have been clear on their hostile view of IFC’s and they are not appearing to retreat any time soon. The time in which we are undertaking growth is a crucial one and there is no room for error. The most drastic change that has ever taken place amongst IFC’s is underway with the introduction of the beneficial ownership register. The beneficial ownership register will disclose the natural person/s who ultimately owns, controls and benefits from a legal entity or legal arrangement. This will disrupt the element of secrecy in which many IFCs in the past have been used as a selling point develop their sector.

Establishing our lane

Let’s have a brief look at other jurisdictions, which over the years have made quite clear what lane they choose be in as an IFC. The first example is BVI. They have an estimated 400,000 registered active companies (an estimated 18 for each inhabitant) and BVI is considered the world’s leading centre for company incorporation and dominates the Asian market (in particular). However, this has not come without occasional scandals where BVI companies have been used in headline grabbing stories of financial misconduct. Although BVI has been assessed by all the relevant international agencies as a reputable and well-regulated IFC, to an extent the lane they chose (mass incorporations, relatively low cost) has, some say, increased the risk that they will suffer reputational damage as a result. Another example is Nevis, part of the independent nation of St Kitts and Nevis which upon gaining its independence passed legislation to protect and cater to shell companies. Despite allegations of Nevis corporations being complicit in tax evasion for wealthy individuals Nevis has maintained some of their secrecy laws. Both jurisdictions were also mentioned in the Panama Papers.

TCI will chart its own course with respect to the growth of the FS sector and Invest TCI will be looking to identify and encourage new business in the sector that is responsible and reputable.

With all that is going on within the global financial services industry, our plan to grow our FS sector takes place against a completely different backdrop to the environment which most IFC’s experienced in the past when they were developing. We may be one of the last to the party, but (as KPMG identified in their 2018 report to the TCI Government about growing the sector) this may be of great benefit to us. TCI has an opportunity to grow our FS sector in line with this changing landscape centred around responsibility, accountability and ethical behaviour and to create a reputation for these qualities internationally. This relentless focus on our core values can and should give us a critical advantage as other, larger IFCs struggle to detach themselves from the weight of their history.

Our goal is not to be the major player in the global financial services industry, but rather to grow our national GDP, create quality consistent sources of government revenue that can be used to benefit the people of these islands, and to create well paid career opportunities for the next generation. To achieve this, we will build upon the reputational strengths we have already firmly established. What those reputational strengths? It derives from the success of our hospitality sector, which has created a global brand for TCI as an elegant, high class jurisdiction with an emphasis on quality over quantity. By maintaining this consistent approach, we will be able to attract financial firms to TCI whose values are aligned with us as a nation. Through establishing our lane as a niche, bespoke and boutique IFC which is responsible and accountable, we can focus on strengthening our sector to support this.

Conclusion

In conclusion, it is the old saying “prevention is better than cure’ that is at the forefront of both Invest TCI and the Financial Services Working Group’s minds as our strategy is developed to build our FS sector. This is an opportunity for TCI to be an IFC birthed during a time of an evolving global financial services landscape. While some in other jurisdictions might see this new landscape as restrictive and intrusive, we will view it as a normality that will be a part of our FS sector’s distinctiveness. We will take in our stride any changes and build our name around this responsible approach, ensuring TCI financial services grows for the benefit and advancement of the TCI, and will become a sector TC Islanders can be proud of.

Benjamin Durham

Invest TCI Business Analyst

Benjamin is a Turks & Caicos Islander who has recently returned home after studying and working in London for the past 11 years. He holds an undergraduate degree in Economics and an LLM in financial law. He is currently employed by Invest TCI as its Business Analyst, and to also assist in promoting and marketing the TCI financial services industry.